Are you a swing trader? Are you looking for a reliable and profitable swing trading strategy? If the answer to the above questions is Yes then you are at the right place. Today we are going to see how we can effectively use the 9 EMA (Exponential Moving Average) with multiple time frames. We simply call it a 9 EMA magic swing trading strategy.
If the trend in a higher timeframe is up then we must go long in the lower time frame.
In this strategy, we are going to use Monthly and weekly time frames to determine the trend and daily time frames to take the entry.
This strategy can give you huge returns so don’t be hasty to exit your trade with a small profit if you do so you will definitely miss the potential huge profit.
Stoploss plays an important role in any strategy. If your stop loss is small then definitely your winning ratio is high so it is essential to always keep the small stop loss. In this strategy, you will find a very small stop loss but the profit would be huge.
In order to be a profitable swing trader, you must follow the below steps. There are some prerequisites to this strategy that should be followed very strictly.
Step 1
Apply the 9 EMA to your chart. Every charting platform has the option to apply 9 EMA. It may vary from platform to platform but you will get this option for sure. If not, ask your charting platform provider.
You might have observed that candles respect the 9 EMA. What does it mean? It means that 9 EMA acts as strong support and resistance. Whenever the candle hits 9 EMA it bounces back. The below image will illustrate whatever I am trying to say.
Now you can see how effective 9 EMA is. Let’s move on to step 2.
Step 2
If you are a swing trader, you must trade in the direction of a higher time frame. In this strategy, we are going to check the monthly trend of the stock because trends usually follow a higher timeframe. If you see the trend is up in a higher timeframe and there is a downtrend in the lower time frame, it is usually a short-term pullback after that trend continues as per the higher time frame.
In order to determine a trend in a higher time frame, we again going to use 9 EMA. Just apply the 9 EMA in the monthly time frame. The price should be trading above the 9 EMA in the monthly time frame.
Step 3
Now switch to the weekly time frame and apply the same 9 EMA to the weekly chart. We already have seen that the price is trading above 9 EMA in the monthly time frame. If the price is trading above 9 EMA in the weekly time frame, it confirms the uptrend and if we trade in an uptrend, our profit potential increases
Step 4
The uptrend is already confirmed as the price is trading above 9 EMA in monthly and weekly time frames. We use these higher time frames for trend confirmation only. The actual buy entry is taken in the daily time frame.
Now we have to find the pullback candles means we have to find the short-term downtrend in the daily time frame.
Step 5
Here is the most important step of this strategy. After getting pulled back, the candles will follow the trend of a higher timer frame i.e. uptrend so we need to find the indication of the uptrend starting. so we have to find one green candle that closes above the 9 EMA in the daily time frame.
Step 6
Once you identified the green candle that closes above the 9 EMA, you can place your buy entry above the high of that green candle. The green candle that closes above the 9 EMA should have a strong body with minimum wicks.
The volume of the green candle should be higher than at least its previous candle’s volume. These conditions must be followed strictly. If you have any confusion in the trade setup, it’s better to avoid it and find the next clear setup.
Step 7
What if the trade goes against your direction? Here stop loss comes into the picture. It is very important to place the stop loss at the right location to keep your losses at a minimum.
After executing your buy entry, If any red candle closes below the 9 EMA, you can please your stop loss below the low of that red candle. In this case, the stop loss would have been below the low of the red candle as shown.
Step 8
Another important point is where to book profit. This strategy gives you huge profit if followed correctly so don’t be hasty to book the profile. Remember that you have to get maximum profit so exit only when you see the below setup.
Usually, the trend lasts longer in a daily time frame. You will see many candles that are going up and taking support from 9 EMA. But if you see any red candle that breaks the 9 EMA support and closes below it then you should be alerted and place your stop loss below the low of the red candle.
If you backtest this strategy, you will find its power of it. 9 EMA really works as a magic EMA. Just practice this strategy for a couple of months and then see the results.
We have tried to explain this strategy very clearly but still, if you have any further questions regarding this strategy, do let us know in the comment section.
