200 EMA Multi-Timeframe Forex Trading Strategy

The 200 EMA Multi-Timeframe Forex Trading Strategy is really simple and has the potential to give you hundreds of pips each month.

You see, with the 200 EMA forex strategy, you are trading with the trend and buying low and selling high.

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Many new forex traders may find it difficult to identify what the main trend is…and if the market is in an uptrend or downtrend. With this forex trading strategy,the 200 exponential moving average indicator makes it easy so you know what the trend is before you enter your trade.

Currency Pair: Any

Timeframes: You need the daily, 4hr and 1hr timeframes for this strategy.

Forex Indicators: Only 200 EMA

 

WHY USE 200 EXPONENTIAL MOVING AVERAGE?

Why is 200 EMA so special in forex trading? Well, I really don’t have any substantiated claims or proof but I’ve seen a handful of sites (traders) state that 200 ema is one very popular forex indicator used by a lot of traders. So that’s why this forex strategy is built around the 200 ema.

Here’s what you need to know about the 200EMA:

  • if you see price is below the 200ema line on your chart, then that’s a downtrend.
  • if you see that price is above the 200ema line on your chart then that’s an uptrend.

200 EMA FOREX TRADING STRATEGY RULES

Ok traders, here are the rules of this trading strategy:

STEP1: first, place 200ema on your daily chart. See if its and uptrend or a downtrend. The daily chart  determines the main trend.

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200 EMA forex trading strategy daily timeframe

Step 2: next you switch to the 4hr chart and see where the 200ema is relative to the price. Is it in the same trend as the daily chart?

200-ema-trading-strategy-4hr-timeframe

Step 3:  next is you switch to the 1hr chart and check if the 1hr chart is in the same trend as the daily and the 4hr charts. Then wait for price to come to the 200ema and then you trade the bounce of price on the 200ema line.  The chart below shows how:

200ema-trading-strategy-1hr-timeframe

HOW TO ACTUALLY TRADE THE 200 EMA FOREX TRADING STRATEGY

    • the best way to enter a trade  is to use price action by the use of reversal candlestick patterns.
    • once you get confirmation with a reversal candlestick pattern, place a pending stop order just 3-5 pips below the low of the  bearish reversal candlestick(if this is a downtrend and you are selling) or
    • once you get confirmation of a bullish reversal candlestick(for an uptrend trade), place a buy stop order 3-5 pips above the high of that bullish reversal candlestick pattern.
    • you stop loss should be place at a minimum, 10-15pips outside of the 200ema line.
    • use the previous swing high or swing low on the 1hr as your take profit target levels.
    • for managing your trade as it becomes profitable, use the trailing stop technique where you move your stop loss and behind each subsequent swing lows or high as your trades moves in favour so that you continue to lock in your profit as price travels towards your take profit target level.

FURTHER NOTES!

  • what happens if the 1hr trend is different from the 4hr and the daily timeframes? Well, wait until 1hr trend is the same as the 4hr and the daily and then trade the bounce off the 200 ema.
  • what happens if the 4hr and the 1hr trend are the same and the daily is different? Same answer as above: every timeframe have to match and have the same trend. If one timeframe is different, you wait untill all are the same trend.
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DISADVANTAGES OF THE 200 EMA FOREX TRADING STRATEGY

  • like all forex trading strategies, 200 ema forex trading strategy has itS weakness. In a period of ranging (flat) market, there may be a lots of false signals. So if the angle of 200 is flat,then avoid trading if you can.

 

ADVANTAGES OF THE 200EMA FOREX TRADING STRATEGY

  • the fact that you are checking 3 different timeframes (daily, 4hr & 1hr) to make sure that the trend is pointing in the same direction in all of these different timeframes ensures that  everything is lining up in the direction of the main trend before you take the trade.
  • because you are trading in the direction of the main trend, your odds of success is greatly improved as well.
  • the use of reversal candlesticks also greatly enhances the entry part of this forex trading strategy…which means you get better entries based on price action at the touch of the 200ema line when you either buy or sell.

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200 ema forex trading strategy

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