Trading with the 3 EMA, 8 EMA, 13 EMA, 21 EMA, and 50 EMA combination offers a layered approach to analyzing short, medium, and long-term market trends. The 3 and 8 EMAs are particularly useful for identifying short-term momentum and quick scalping opportunities, reacting rapidly to price changes. When the 3 EMA crosses above the 8 EMA, it often signals the start of a short-term bullish move, while a downward cross can indicate bearish momentum. These two fast-moving averages give traders an edge in detecting early signals before broader market shifts become evident.
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The 13 and 21 EMAs serve as intermediate trend filters, helping to confirm the strength or weakness of the price action. For example, if the 3 EMA and 8 EMA cross above the 13 and 21 EMAs with strong volume, it reinforces the bullish signal and suggests a sustained trend. Conversely, if the shorter EMAs begin to pull back while the 13 or 21 EMAs remain flat or declining, traders might consider scaling out of positions or preparing for a reversal. This mid-tier grouping of EMAs is particularly effective for swing traders who need more confirmation than a simple crossover system.
The 50 EMA acts as the longer-term trend anchor and is often used as a dynamic support or resistance level. When all EMAs are stacked in order from fastest (3) to slowest (50) in either ascending or descending order, it creates a powerful visual confirmation of trend alignment. This EMA stack technique helps traders avoid false signals and stay on the right side of the trend. A pullback to the 50 EMA, followed by a bounce and continuation of the shorter EMA alignment, often presents high-probability trade entries in trending markets.
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Money Management:
It is important to follow up with this strict rule of investment:
If you have $100 in your account, each open position should be $5 tops
If you have $200 in your account, each open position should be $10 tops
If you have $500 in your account, each open position should be $25 tops
If you have $1,000 in your account, each open position should be $50 tops
If you have $2,000 in your account, each open position should be $100 tops
If you have $5,000 in your account, each open position should be $250 tops
We're currently in our 13th year helping traders become successful in the live markets so we know a thing or two about leveraging a small account into serious wins.
Risk Disclaimer:
Trading options involves financial risk and may not be appropriate for all investors. The information presented here is for information and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument. Any trading decisions that you make are solely your responsibility. Past performance is not necessarily indicative of future results.
