Binomo offers plenty of indicators to choose from. They all can be a great help in conducting technical analysis. It is good to know how they work and then decide which one works well for you. Sometimes even a simple method can bring good results. And such will be a strategy based on a moving average that we are going to describe today.
Trading the EMA bounces on Binomo
Today’s strategy is based on one indicator only which is an Exponential Moving Average. It is more attentive to the latest changes in the price than the Simple Moving Average. And the price is in constant motion. It goes up and down all the time still, you should be able to determine the range of fluctuations. But first, you have to prepare your trading environment.
Naturally, you have to be logged in to your Binomo trading account. You should also decide what instrument you are going to trade. Choose the type of the chart and set its timeframe anywhere from 1 to 5 minutes. Next, go to the Trading instruments icon and find Moving Average. Here, you ought to adjust its period to 34 and choose the Exponential type. If you wish, you can adjust the colour of the line, so it is better exposed on the chart. In the end, click on the Apply button.
A trading method that is based on the EMA bounces requires that a trader observes the price movement and seek trading opportunities when the price exceeds the line of the EMA and then returns and bounces.
When is the right moment to go long?
The first thing you should be aware of is that this is a trend following technique. So you should identify the uptrend if you wish to enter a transaction for the price increase. You can do that simply by observing the price bars in relation to the EMA line. The uptrend occurs when the price bars are developing over the indicator line and are moving away from it.
When you have identified the uptrend, you should then wait for the price to move in the opposite direction. Observe when it nears or even crosses the EMA from above.
Enter the trade when the price instead of creating a lower low, bounces from the EMA and returns to the upward movement. Keep your transaction open for the duration of three consecutive candles.
When to go short?
When you want to open a transaction for the price decrease, you should identify the downtrend first. And you do that by checking whether the price bars are developing below the indicator and are moving away from its line.
Now, wait for a change in the price direction. It may even cross above the EMA.
However, the price does not create a higher high but bounces instead and continues downward movement. This is the time when you should enter a short trade. The trade duration should be 3 times longer than your chart time frame. Check the chart of Aussie below to see exemplary trade on the 1-minute chart.
Trading with the EMA bounces is quite straightforward. Only one indicator is needed and that is the Exponential Moving Average.
We recommend setting the period of the EMA at 34 but when you gain some experience in trading with this strategy, you can play with different values. You will then see that the higher period of the moving average, the smoother its line looks on the chart.
The bounces from the moving average are quite frequently used by traders. Nevertheless, there are never guarantees and you should be prepared that false signals may be produced. Therefore, always have your trading plan on hand and risk management well thought through.
Make use of the Binomo demo account which is not only free of charge but can be supplied with virtual cash anytime you need it. All the indicators are available on the demo account so you can practice any new trading technique in a risk-free environment. Once you understand how a method works, you can switch to a live account.
All the best!