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Does anyone else find the 20EMA a distraction?
On trading range days it gets ignored and on strong trend days it gets ignored...
I understand your confusion, we all had been there... When the strong day becomes climactic and the Always in direction switches to short, like it happened in the last bar of your chart, the EMA will not hold so better to not be looking to buy EMA bounces, the move now is going down most likely in the form of a bear leg in a developing TR.
At the start of today I though that we needed to test the EMA as the trend looked weak and it looked overbought. It kept me out of some good trades. To be honest most days I look back and find it hard to see how the EMA was useful.
At the start of today I though that we needed to test the EMA as the trend looked weak and it looked overbought.
That was right, but you didn't know in advance if the test would become a PB in a trend or the MKT rather would create a TR, or even a revesal. Once the MKT became climactic, the PB and continuation's probability decreased.
It kept me out of some good trades.
The EMA seems an easy concept but it takes time to really understand it. Its main objective is not giving trading signals (it rarely does) but helping with the context. If anything, it will only give signals in trend days but, if the day becomes climactic and/or the the always in direction switches, it won't (actually then the entries at 20 EMA are traps).
Yesterday we had a small PB bull trend, so strongly AIL since bar 3, the 20 EMA was far below, as it is always the case, so you could take the longs if you could bear the risk, which was big. The EMA should not interfere there.
In SPBL days, the easiest trade to take is the 20 EMA gap bar, so we should be ready for it if the MKT stays AIL. However, we had a middle of the day reversal with a FF (triangle) followed by a climax with a second entry, both signal bars were good, and then a 3 bar BO (the last bar of your chart), so now the probability for a succesful long at EMA decreased and we were most likely in a TR, not in a trend anymore, so the 20 EMA gap bar failed.
Yet, Al in his daily report says it still was reasonable to take this trade and it is marked as a good trade for beginners. Nowadays, I rarely disagree with Al's reading but when I do I know I have a learning opportunity in front of me so I go to the encyclopedia and look for contexts similar to yesterday so I can clarify why Al marked this trade and I missed it.
To be honest most days I look back and find it hard to see how the EMA was useful.
I have have this feeling many days in my life. While you get more confortable with the 20 EMA, you can do what we all tried in the past when we were struggling: removing the 20 EMA or using a faster EMA, like the 10 EMA. Yet, better than this workarounds is to really understand how the 20 EMA is used and, for this, as I said above, you have the encyclopedia and the daily reports where you will find many trend days where the EMA gave withtrend signals in SPBL days, and many others where those signals were traps. This is an incredible learning device... for me, it was a game changing.
Give it a try (if you haven't)!
Great advice, thanks. I'm subscribed to the daily setups. It's definitely a resource I need to look at more but I find the web-based PowerPoint software very difficult to use. I think I need to persevere more with that.
To be honest removing the EMA has had good results for me. Relying on the price action structures taught in the course: drawing all the channels, ranges and wedges without the confusion of the EMA brings a lot of clarity. But at the same time I worry constantly that I might be missing something by not having the EMA and a few times a bought right into the EMA which failed.
It's good to hear that it's not just me who struggled with this. I'll definitely take your advice and try to spend some time each day studying a few of the daily setups.