Are you trading/taking Buy or Sell decisions based on 20 day EMA. The below picture will tell you how 20 EMA is inefficient in picking up the trends.
The above Nifty chart plots the 20 day EMA line along with Buy and Sell Signals.
A Buy Signal(Green Arrow) is produced if the candle closes above 20 Day EMA
A Sell Signal(Red Arrow)is produced if the candle closes below 20 Day EMA
For me as EMA President it was sad to see the lack of communication between WMA, EMA, and National Federation concerning the bidding for the next championships. Two European candidates for 2018 Venice (ITA) and Malaga (ESP) two ambitious or-ganizers and one loser. The EMA Council was not informed about the competition be.
When there are too much of crowded mixed signals it is difficult to take the correct signal obviously we will fail to capture the correct trend. More over a sideways trend results in too much distortion in the signal.
If you are a believer of considering 20 day EMA as supports/Resistance for your trades then you need to rethink about modifying your strategy
Now visualize yourself Crossover of the Candle with 20 day EMA cant be the right strategy to trade/invest
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EMA crossovers are popular entry/exit signals. It would be worthwhile to know which combinations have been the most successful in the past.
If you give me: EMA entry crossover (i.e., 10/20) EMA exit crossover (these can be different than the entry points) Timeframe (days or hours or minutes etc)
I will spit out: % profitable Profit Factor (ratio of dollars made to dollars lost) Total net profit (assuming no commisions and trading 1 BTC per trade)
A few points:
-I am backtesting from 1/1/2012 to the present.
I am doing the analysis through the Bitconnector add on to NinjaTrader. Directions can be found at my blog http://www.signalstrengthfinance.com/blog/
-This isn't the holy grail. Past performance doesn't imply future results etc. This is merely for research purposes, but if anyone wants to further warn about the dangers of curve fitting, then that's cool.