Contents
Today we will look at an easy yet quite effective EMA trading strategy. IQ Option offers many technical indicators to help traders discover good entry points. Some work well in combinations. One example is the Exponential Moving Average joined with the Momentum. They give satisfying results for forex traders on 30 minutes timeframes and larger. Let's see what this strategy is all about.
Key Takeaways🔑
| →EMA trading strategy with Momentum is simple and effective for forex traders on 30-minute timeframes and larger. |
| →Both EMA and Momentum indicators should be set with a period of 20 for optimal results. |
| →This strategy works best in trending markets and is not suitable for sideways movements. |
Chart preparations for EMA trading strategy
You have to be logged in to your IQ Option account. Choose the asset and set the timeframe. Then click on the Chart analysis icon in order to add the indicators needed. Find the moving average, choose the exponential type and set its period for 20. Next, do the same for the Momentum indicator. Its period should be also set for 20.
You will be able to view the indicators attached to your chart under Added in the Indicators tab. You have also a possibility to save this template so it will be easier and faster to use the same strategy in the future.
The basics of the EMA trading strategy with Momentum
Your chart is set. Now you have to observe both indicators and wait for the signals to open a short or a long position. What are they?
Opening and closing a short position with the EMA trading strategy
A signal to go short is produced when the Momentum oscillator crosses the 0 line on its way down. At the same time, a candle should close below the EMA line. When both conditions are met, you can open a sell position.
You can hold a position open as long as you don't receive a signal to close it. And you get it when the Momentum indicator moves back to the 0 line and the candle closes over the EMA.
Opening and closing a long transaction with the EMA + Momentum trading strategy
When the Momentum indicator's line crosses the 0 line on its way up, and the candle on the price chart closes over the EMA line, you should open a long position. It is best when both happen at the same candle but you can assume that the setup is correct if the Momentum and the EMA signals occur within 1-3 candles.
You can exit the long trade when the Momentum oscillator returns to the 0 line and the candle closes beneath the EMA.
What indicator works best with EMA?
Averages are fairly easy to combine with other technical analysis indicators. In our opinion, they are best used with oscillators. Today's EMA trading strategy uses one of them. Momentum is a very simple construct that mathematically compares the current closing price with the closing price n periods ago. Our strategy assumes the same period for the average and the Momentum indicator. The period is 20. This combination allows you to get involved in a trend at an early stage of its formation.
Pros and Cons of EMA Trading Strategy with Momentum 💡
| Pros 😊 | Cons ☹️ |
|---|---|
| Easy to implement and understand | Not suitable for sideways market movements |
| Effective in 30-minute timeframes and larger | May generate false signals in choppy markets |
| Works well with trending markets | Requires constant monitoring of indicators |
EMA and Momentum Indicator Comparison 📊
| EMA (Exponential Moving Average) | Momentum |
|---|---|
| Smooths out price data to show a trend | Measures the rate of change in price |
| More weight to recent data points | Shows trend strength or weakness |
| Works as a support or resistance level | Used for identifying overbought or oversold conditions |
Conclusion
There are many good combinations of indicators you can use in your trading. The strategy based on the Exponential Moving Average and the Momentum oscillator is quite simple and reliable. It works well when there is a clear trend. You should not use it during sideways movements of the price.
This strategy can be used by traders at any skill level. You do not need to have special knowledge. Just add both indicators to the IQ Option chart and wait for the signals to appear.
A signal is received when the two conditions are met. One is when the Momentum crosses the 0 line on its way down or up. The second one is when the candle closes below or above the EMA line.
With the EMA trading strategy combined with Momentum, you also get the signals to exit the trade.
Remember, there is a demo account available on the IQ Option platform. It is completely free of charge so feel free to use it as a training field. Check today's strategy there and tell us how it went in the comments section below.
Wish you high returns!
Q&A: EMA Trading Strategy with Momentum 💬
- Q: How do I set up my chart for this strategy?
- A: Add the EMA and Momentum indicators to your chart, both set with a period of 20.
- Q: When should I enter a long position?
- A: Enter a long position when the Momentum indicator crosses the 0 line on its way up, and the candle on the price chart closes above the EMA line.
- Q: When should I enter a short position?
- A: Enter a short position when the Momentum oscillator crosses the 0 line on its way down, and the candle on the price chart closes below the EMA line.
- Q: When should I exit a trade?
- A: Exit a trade when the Momentum oscillator returns to the 0 line and the candle closes on the opposite side of the EMA.
- Q: What type of market is this strategy best suited for?
- A: This strategy works best in trending markets and is not suitable for sideways price movements.