Daily Time Frame EMA & SMA Strategy
Time Frame: Daily
Prior knowledge of support & Resistance, Moving Averages & Price Action.
Things to Consider
This strategy should be applied only when the price is above 200 Daily Moving Average
When the price falls below 200 DMA, we will stop & wait for the price to return back above it.
You should book quick profits. Do not hold the trade for too long. Set your targets before hand.
Breaking Our Portfolio
For Example, We have 2000$, to begin with. We will break it into 6 parts. Each next part should be double the previous part.
Part 2: 100$ (double of part 1)
Part 3: 200$ (double of part 2)
Part 4: 400$ (double of part 3)
Part 5: 800$ (Double of part 4)
Part 6: 450$ (whatever is left)
First, we will have to figure out if it is the right time to trade or not
As shown in the figure on the left side, when there is a cross-over of all the moving averages i.e. 21 is above 55, which is above 100, which is above 150, which is further above 200, we can say that an uptrend is about to start.
The averages should be above one another, the smallest one by value should the on top followed by the larger ones.
In this strategy, we will have to place our buying bids at the averages & will have to change them with the changing value of the averages. Yes, it requires a good effort but the returns are going to be fruitful.
At 21 EMA: 50$
At 55 EMA: 100$
AT 100 EMA: 200$
At 150 EMA: 400$
At 200 SMA: 800$
Keep the rest 450$ as it is.
Once the bullish cross-over takes place, you need to place your buying bids as mentioned above. These averages are dynamic and change every day hence, you might need to change your bids every day.
Why are we doubling at every lower bid?
In this strategy, we are expecting a bounce from each of the EMAs & MA mentioned above. But the market can perform however it likes. So, in case we do not see a bounce from a particular level we can average our buying at a lower level & save ourselves from losses. We are managing risk here.
It is better explained in the example on the right side. The big red candle did not respect the 21 EMA, 55 EMA, and neither 100 EMA.
Finally, it bounced off 150 EMA.
All our bids till 150 EMA executed. Thanks to the doubling of the bids, our average buying dropped to 368$
The Market recovered after hitting 150 EMA, but we booked our profits at 430$. Do not hold your trade for a long time. We never now it might come down again
In a clear uptrend, this strategy is so effective. You can take multiple profitable trades.
Once Bearish Cross over happens, become careful. There will be bounces at the moving averages but the price will be heading towards a downtrend