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Using Exponential Moving Average

January 27, 2012

Trading rules:

  1. When an EMA rises, trade that market from the long side. Buy when prices dip near or slightly below the moving average. Once you are long, place a protective stop below the latest minor low and move the stop to the break-even point as soon as prices close above their EMA.
  2. When the EMA falls, trade that market from the short side. Sell short when prices rally toward or slightly above the EMA, and place a protective stop above the latest minor high. Lower that stop to the breakeven point as soon as prices close below their EMA.
  3. When the EMA goes flat and only wiggles a little, it identifies an aimless, trendless market. Do not trade using a trend-following method.

 

From → Financial

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