In today forex faq, we have a question from one of our fellow traders asking me about 200 EMA trading.
Below is the question
I like to trade the “200 Day Moving Average” but problem is the trend always not continue after breaking 200 EMA…Although this does not happen always..how can i be confirm that the trend will continue after crossing 200 EMA?
The 200 EMA is indeed a very good indicator to use in trading. The best way to use this indicator is to tell the trend. When it is sloping in a certain direction with good gradient, you will be able to tell the direction of the trend as well as the strength of it.
You can find out more about the use of this indicator via the link below
There is no way we can 100% confirm anything in trading. What we can do is to find ways to increase the chance of knowing whether the price will continue in its trend or not.
My recommendation to you is to make use of support and resistance to help you increase the chance of the price continuing in its trend as per the 200 EMA.
Below are some indicators you can use to act as strong level of support and resistance
Both of these indicators are very strong level of support and resistance as these 2 are indicators that are often used by those big dog traders. Therefore you will find that the price often respect the levels of these 2 indicators.
I have written post on these 2 indicators before in my blog and you can read more about it via the link below
For example, when you see that the 200 EMA is showing a strong downtrend. When the price retraces and move back up, you can wait for it to hit a major resistance level to push it back down again.
You can actually do a back testing using these indicators and then find the best entry levels for you. It will be better if you are able to add in some other pre trade condition or ways to help you avoid false alarm trade.