The 5ema and 8ema forex trading strategy is a moving average cross-over forex trading system.
The 5 ema is the fastest exponential moving average indicator, which means it responds faster to price movement than the 8 exponential moving average.
When 5 ema crosses 8 ema to the upside, it means that the trend is up so you only look to buy.
When 5 ema crosses the 8 ema to the downside, it means the trend is down so you look for an opportunity to sell.
Table Of Contents
Trading Parameters And Requirements
Currency Pairs: Any but preferably the majors.
Indicators: 5ema and 8 ema.
Timeframes: any buy preferably 15 minutes and above.
- 5ema crosses the 8ema to the upside.
- whichever candlestick that makes makes the 5ema and 8 ema cross is the signal candlestick: place a buy stop pending order at least 1-2 pips above the high of that candlestick.
- for stop loss, look for a nearest swing low or support level and place your stop loss a few pips 2-3 pips under it. This is so that you avoid getting stopped out prematurely. If the nearest swing low/support level has a large stop loss distance then place your stop loss at least 5-10 pips under the low of the signal candlestick
- for take profit target, wait until an opposite signal is generated then take whatever profit you have and bail out. In this case, when you see a sell signal generated, you exit your buy trade with whatever profit you have made.
- 5 ema crosses 8ema to the downside.
- the signal candlestick is that candlestick that makes the ema’s cross. That signal candlestick must close first to confirm the cross-over before and order can be placed.
- place a sell stop pending order 1-2 pips below the low of that signal candlestick.
- place your stop loss just a few pips above the nearest swing high/resistance level. If that stop loss distance is too large then place your stop loss 5-10 pips above the high of the signal candlestick.
- for take profit target: take whatever profit you may have when an opposite buy signal is generated.
Advantages of the 5 ema and 8 ema forex trading strategy
- the 5ema and the 8ema responds quickly to price moves compared to say, 10 ema and 16 ema or 25em and 34 ema and as such, you have an opportunity to get into a trade at the very earliest start of a trend.
- in a strong trending market, this system will give you good profits.
- the rules are really simply to follow and understand.
Disadvantages of the 5 ema and 8 ema forex trading strategy
- any forex trading system that uses moving average indicators as trade signals to buy or sell will lag compared to price. And as such, any trade entry taken will only be made after price has moved, sometimes a significant deal.
- in a non-trending market, you will have many false buy and sell signals.
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