A 200 EMA forex trading strategy is based on exponential moving averages (EMA). It is an easy to implement and manage strategy that is based on 200 period exponential moving averages. Note that there are a lot of strategies based on EMA, and traders often make the mistake of jumping from one to the other with nothing good to show for it. Generally, once you find a strategy that works, all you have to do is stay on it, you might have to take some blows, but with time and good practice, you will learn how to make more profits that losses (if at all) with it.
There are rules that must be followed in order to make the best out of the forex 200 EMA strategy; one of them is to follow the trend principle of buying low and selling high. This means buying a commodity at a point it is at its lowest value, or at least close to it, and selling it off when it is at, or close to its highest value.
APPLICATION OF THE 200-EMA STRATEGY ON MAJOR MARKET MOVES
When there is a major market move, the 200-EMA strategy can be used to execute large swing trade entries. Traders that know what it means to execute a large swing trade will attest to how notable this functionality is.
A swing trade is one of the many speculative trading strategies in the forex market which presumes holding a position open for a specified period of time, usually between one to several days, in order to make profits from the constant price changes that may take place during that period. These price changes are known as a swing.
Seeing as this is a peculiar market condition with major market move, not all sort of strategy can work well on it. The forex 200-EMA strategy is one of the few that can be used to take advantage of such an opportunity.
STEPS TO THE 200-EMA FOREX TRADING STRATEGY
Here are the simple steps to follow when trading with the forex 200-EMA strategy
1. On the daily chart of the currency pair you are trading, place the 200 EMA indicator and identify the direction of the trend
2. On the 4 hour chart, see if the 200-EMA is in the same trend as in the daily chart, if not make adjustments
3. Also make sure the 1 hour chart have the 200-EM is in the same trend as the 4-hour and daily charts
4. Enter the trades in the one hour time frame charts making sure the trend is identical across the three charts
5. On the one hour time frame charts, focus on buying low and selling high
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