Moving averages, included in the basic set of technical indicators of any platform, are often found in a wide variety of strategies. They are combined with candlestick analysis, on their basis with modified settings create additional tools (Alligator, Bollinger Bands). THEME is one of such combined instruments where the moving average indicator plays the main role. It’s not in the basic MT4 tools, but it’s easy to find a template on the Internet that is copied into the platform folders without any problems.
Indicator: moving average theme
The exponential moving average (EMA) is a sliding one that has a more complex formula compared to the average MA, which is based on the arithmetic average of prices for a certain period. EMA reacts faster to price changes (less late) and has a more complex formula.
THEME is an indicator built immediately on three exponential MAs. The tool allows you to automatically open positions without fear that the signal came with a delay or vice versa appeared too early. The indicator also allows you to determine the state of the market (flat and upward / downward movement).
Trading Strategy Terms:
- timeframe – M5. Short-term trading with TEMA is quite successful;
- Recommended currency pairs: EUR / USD, GBP / USD;
- TEMA = 200 indicator period.
Conditions for opening a long position: the price goes down for a long time and is under the TEMA indicator for a long time. Duration is relative and is estimated visually relative to past periods. A signal to open a position is when the price crosses the average moving upwards indicator. As soon as the first candlestick closes above the indicator, you can open a position.
Stop loss is set at 10-15 points. The position is closed by 50% after a 10 point profit has been reached. The remaining 50% are insured trailing stop length of 5-10 points. As practice shows, the price rarely passes more than 15 points after a reversal, therefore it is not worth counting on a large profit. Intra-day signals are not very frequent, but the risks are minimal. Conditions for opening a short position are opposite: first, there should be a steady uptrend above the moving average indicator. As soon as the candlestick closes below the TOPIC, we open a sell position.
- you can change the period. Testing is carried out on a minimum of 300 transactions or in the interval of at least 6 months;
- You can add an oscillator, but it can give delayed signals.
Conclusion. The moving average indicator and the THEME, on its basis – a tool that gives even some signals to enter the market, but does not give a lot of false signals. In general, the strategy is profitable, but rather is suitable as an additional one. Also, it will be interesting to novice traders to learn the principles of the sliding. The strategy is proven and effective for every currency pair.