You will find out many strategies available for traders. A solid strategy is quite important in getting good results. It helps to recognise the best moment to enter a trading position. Today, you will get to know a new strategy that combines two indicators, the Average Directional Movement Index and the Exponential Moving Average. Let’s see what it is all about.
ADX + EMA strategy
Trading strategies are sometimes based on a few different indicators. This is the case for today’s strategy. The ADX and the EMA work together to produce trading signals for you.
You should be logged in to your Binomo account. Choose the instrument and the type of the chart. Then, set the timeframe for 1 minute. Your transaction should last 1 minute as well.
Adding the indicators to the chart
Go to the indicators icon and choose Moving Average. Set the period of the indicator at 28 and the type for ‘Exponential’. You can also change the colour of the EMA line if it makes reading the chart easier for you.
Now, go to the indicators icon again and choose the ADX. You should adjust its period to the value of 5. The Smoothing period should be set also at 5.
The Average Directional Index will appear beneath your price chart. It consists of three lines. One is known as ADX (yellow line) and shows how strong the trend is. The second, +DI is green and the third, -DI is red. They signify bullish and bearish movements.
Opening a short position with the ADX + EMA strategy
There are a few conditions that have to be fulfilled before you can open a short position with the ADX + EMA strategy. These are:
The price intersects the EMA28 line and the next bar emerges below the indicator’s line.
The -DI line of the ADX indicator moves from below and crosses the +DI line.
The signal candlestick is bearish.
This is your setup to enter a short trade. A signal received will be stronger if the preceding candle implies the downtrend.
Opening a long position with the ADX + EMA strategy
To enter a long position you should wait for a few things to occur.
The price candlestick should cross the line of the EMA28 from below and the next candles develop over it.
The +DI crosses above the -DI line.
A signal candle is bullish.
The signal is stronger when the preceding candle is also bullish.
Trading with the ADX + EMA strategy is quite straightforward. You just need to follow the rules. First, set the timeframe of your chart for 1 minute. Then, add the Average Directional Movement Index and the Exponential Moving Average. Change their periods as described in the article. Next, wait for the favourable circumstances and enter the trade that lasts 1 minute.
Binomo offers its users a demo account, free of charge but providing a wonderful possibility to train before you invest your money. Go there and practice trading with the use of the ADX + EMA strategy.
Remember, there is no strategy that will guarantee you success. Be prepared for occasional losses but try to minimize them and get the most out of your trading.
Wish you a good experience!