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2. In the second example I have used the same 200 EMA but as a support. A Bullish Engulfing has emerged right at the mobile support. The entry should have been on the opening of the third candle (to assure the fact that we have a candlestick pattern). The Stop Loss should have been set under the pattern and EMA, while the Take Profit could have been set at the closest supply area.

technical analysis, candlestick patterns, moving average strategy, moving averages, trading strategy

3. The third example is made on a 24 EMA of the closing price for the AUD/USD on a daily chart. After I have convinced myself that this is the proper moving average to use in this conditions I have started to look for candlestick patterns. As you can see on this chart I first encountered a Morning Star pattern, which tested the EMA as a support. After a confirmed breakout under this moving average, a Bearish Engulfing signaled correctly a down move. Entries, Stops and Take Profits for the long trade example here are set like in the 1 and 2 examples, while for the short trade I have used a money management target, because I did not have any good support level.

technical analysis, candlestick patterns, moving average strategy, moving averages, trading strategy

Recommendation

This is a very simple strategy that can be used quickly. However, I would recommend testing it on demo accounts and practice intensively for better understanding. The moving averages that you will use in your trading should be tuned to offer better results and the candlestick pattern should meet the theoretical characteristics for higher probability of success.

Do not forget to use money management along with this relatively simple trading strategy. Stop Losses are required for protecting your account in case of losing trades.

Do not underestimate the market, even though the probability might be in favor of the trader when using this strategy, it might happen to catch a false signal and find oneself in a losing trade.

And do not forget to trade what you see and not what you think you see!

Razvan Mihai

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