5 EMA And 8 EMA Crossover Swing Trading System
Moving average crossovers are a popular method of approaching a trading strategy. You can use long term exponential moving averages to take advantage of a “macro view” or short term averages such as the one discussed here, 5 EMA And 8 EMA.
The short term moving averages crossing over indicates the short term trend has changed and we want to trade in the direction of the cross. If the 5 is above the 8, we will look for long trade entries. If the the 5 ema is below the 8 ema, we will look for short trades.
Keep in mind this is a short term swing trading strategy so keep your profit expectations in check.
5 EMA And 8 EMA Trading Strategy Details
Indicators: 5 ema & 8 ema
Currency Pairs: Any
Long Entry Rules: Wait for 5 ema to cross 8 ema to the upside. You can buy stop the high of the candle that turned the moving averages or simply enter at close.
Short Entry Rules: When 5ema crosses 8ema to the downside, you can sell stop the low of the candle that turned the moving averages or simply enter at close.
Stop Loss: Set your stop 5 pips above or below the entry candlestick. If that entry candlestick is a narrow range candlestick, use the previous candlestick.
Take Profit: You can use a couple of options for take profit
- Look to the nearest chart structure
- Use a cross of the moving averages
- Use a reversal chart pattern to signal your trading exit.
This is a daily chart of the AUDUSD with our 5 ema and 8 ema moving averages applied.
- I am using the conservative entry of setting a sell stop below the low of the setup candlestick. If you used the moving average crossover as an exit and exiting at the close, this short trade banked 178 pips or a 1.38R
- You can trade as an “always in” trading strategy and this trade sets up with a spinning top candlestick but you are triggered in on a momentum candlestick. Using a resistance structure (see #1), this trade banked 256 pips (2.4R). Using the crossover at 3, the pips total 298 pips. Fibonacci 272 profit target 376 pips or 3.5R
- This short trade does not trigger as price never passed the low of the setup candlestick.
- Triggered long but trade appears to be in danger of taking a close upon the cross of the moving averages
As you can see, the 5 ema and 8 ema crossover trading strategy is pretty straight forward. As you gain experience, you will tend to use other tactical trading plays or trading strategies (breakouts, pullbacks) to enter the trend if you missed the actual crossover trade trigger.
Manage A Profitable Trade
How would you manage a profitable trade placed with the 5 ema and 8 ema crossover swing trading strategy if you are looking for higher returns?
- If trade moves in favor, and you want to lock in profits, the best option is to move stop loss and place behind the high(or low) of each subsequent candlesticks that forms. That means for a short trade, move stop loss and place above the high the candlestick that continues to make lower highs.
- For a long trade, move stop loss and below the low of each subsequent candlestick that continues to make Higher Lows.
- Or if on the daily time frame, you may try to use a 50-80 pips trailing stop.
- If on the 4 hr time frame, use 25-40 pips trailing stop.
- Use an ATR trailing stop
- Use trading stop placement tips from this article.
Good (and bad) of 5 EMA And 8 EMA Cross Over Swing Trading System
- Easy to understand and implement.
- In a strong trending market, there is potential to make a lot more profit when you ride out the trend with good trade management.
- This trading strategy would give a lot more false signals in a ranging market (which you can also trade)
- Stop loss can be quite big depending on the time frame that is used so you need to adjust your position sizes to bring your trading risk to an acceptable level.
- Moving averages are lagging indicators and every entry taken based on this swing trading system is effectively “late”. This means that price had already made a big move and you would have not gotten into the trade at the start of that move because the entry of the 5 ema & 8 ema trading system is based on lagging moving average indicators
1.Since breaking out over the 100 day SMA $SPY has been trading in a range with $274 acting as resistance and $270 as support. 2.The average true range that $SPY is trading in continued to decline in May. With the ATR at 2.70. This is bullish. 3.Price remains bullishly over all moving averages. 4.$SPY has closed above its 10 day EMA for the past 12 trading days as it acts as end of day support. This is a very bullish sign. 5.$SPY is still over the 10 day EMA / 50 day EMA crossover. This bullish signal back tests well. 6.MACD continues to stay under a bullish crossover. 7.RSI is slightly bullish at 56.80 showing some momentum and has room to run higher. 8.Volume on the $SPY chart had down days slighter higher than up days last week. 9.$VIX finished last week with three straight days of lower highs and lower lows on the last three days finishing at 13.22. This is still very low historically. 10$IWM has been leading the stock market higher as it stays within striking distance of all time highs. I currently have bull signals in this market and I remain long $BIB $UWM $DDM $SSO and $QLD.
And here we are again talking about the strategy that withstood the test of time. This Forex trading method is based on the same study of defining support and resistance levels and trading upon the fact of their violation. A trading setup requires only an open chart and no restrictions for the currency or timing preferences. Entry rules: Once the price makes it through the “pivot Line” - dotted white line on the figure below (drawn using the latest price peak) - and closes above (for uptrend) or below (for downtrend) the line buy/sell accordingly. Exit rules: not set. However, exit can be found using Fibonacci method; or traders can measure the distance between point 2 and point 3 and project it on the chart for exit. Additions: as an additional tool traders can use MACD (12, 26, 9). The rules for entry then will be next - let’s take a SELL order: When MACD lines cross downwards, you look for 1-2-3 set-up to form. When the price starts “attacking” the “pivot Line” you check that MACD is still in SELL mode (two lines are heading down). Once the price closes below the “pivot Line” – place Sell order. Same chart: MACD (12, 26, 9) is added. Enjoy!
Hello,i am testing an approach to sideways markets.The ER2 Future moves very volatile sideways.The idea is to create a delayed band around a moving average.If price leaves the band it may be trending.But if price moves back in the band, chances are it will go to the other side -oscillating, moving sideways.I do not have enough historical data yet to establish a long term proof.But my 5 days ("curve fit" i know) is incredible.Since i work with Amibroker Professional i wont post codes.The model is fairly easy to remodel in TradeStation.I have fit my model to the ER2.Upper Band: lagging EMA + offsetLower Band: lagging EMA - offsetEntry long: price crosses Lower Band from belowExit long: price crossed Upper Band from belowEntry short: price crosses Upper Band from aboveExit short: price crosses Lower Band from aboveRisk: Price trends within this Band.A proper trend stop must be implemented.Attached is a screenshot.This did not work for ES or NQ well, just the ER2.I thought i'd share it for evaluation.Please dont use without proper backtesting!Oh, i forgot: my timeframe here: 15 seconds.