Indicators used in the strategy #
- 200 Exponential Moving Average (EMA200): A trend indicator that shows the average price of an asset over the past 200 periods.
- 100 Exponential Moving Average (EMA100): Another trend indicator, this time showing the average price over the past 100 periods.
- 25 Exponential Moving Average (EMA25): This indicator shows the average price over the past 25 periods, reacting more quickly to recent price changes than EMA100 and EMA200.
- Average Directional Index (ADX): A momentum indicator that measures the trend’s strength regardless of its direction. A reading above 30 often suggests a strong trend.
Calculation #
This strategy uses four different technical indicators: the EMA200, EMA100, EMA25, and ADX. The EMA200, EMA100, and EMA25 are calculated by applying more weight to the most recent prices, causing these averages to react more quickly to price changes than simple moving averages.
The ADX is calculated by measuring how much the price is moving in one direction and comparing it to how much it’s moving in the other direction. It ranges from 0 to 100, with values above 30 often suggesting strong trends.
When it generates long signals #
This strategy generates a long signal when:
- The price is above the EMA200.
- The EMA25 is above the EMA100, which in turn is above the EMA200, indicating an uptrend.
- The ADX is greater than 30, suggesting a strong trend.
- The price crosses the EMA25 to the downside but remains above the EMA100. After this event, within the next 5 candles, the price crosses the EMA25 to the upside.
The strategy indicates a potential long entry point when these conditions are met.
When it generates short signals #
This strategy generates a long signal when:
- The price is below the EMA200.
- The EMA25 is below the EMA100, which in turn is below the EMA200, indicating an uptrend.
- The ADX is greater than 30, suggesting a strong trend.
- The price crosses the EMA25 to the upside but remains below the EMA100. After this event, within the next 5 candles, the price crosses the EMA25 to the downside.
The strategy indicates a potential long entry point when these conditions are met.
Disclaimer #
This documentation and the associated trading strategy should not be construed as investment advice. They’re intended for educational and illustrative purposes only, showing how to use certain technical indicators in trading strategies. Trading involves risk, and the past performance of a strategy is no guarantee of future results. Always conduct your own research and consider consulting a qualified financial advisor before making any trading decisions. Furthermore, there’s no guarantee regarding the correctness of the information provided.
