EMA crossover trend follow

Formula

Step 1: wait until more than 50 candles have closed, so both lines are ready. Step 2: Buy when, on a closed candle, EMA 20 is above EMA 50 and on the candle before it was not. Sell is the mirror. Step 3: entry = the next candle's open. Step 4: stop = entry - 2 x ATR. Step 5: R = entry - stop. Target = entry + 2R. Step 6: the trade ends at the target, the stop or the day's last close. If 1 candle reaches both, the stop counts. Only 1 trade runs at a time.

How it is read

Here is an example. ATR (average true range) is the usual size of 1 recent candle, from high to low. Say ATR is 25 points and the next candle opens at 25,300. The stop is 25,300 - 50 = 25,250. R is the gap between the entry and the stop, so R is 50 points. It is what 1 trade loses when the stop is hit. The target is 25,300 + 100 = 25,400. That is 2R past the entry. Here is how a trader can win with this rule. Each win is 2R and each loss is 1R. So you can be right on only 4 trades in 10 and still come out ahead. Take 4 trades. 2 hit the stop for -2R and 2 hit the target for +4R. The total is +2R, which is 100 points here. A win is more likely when you take the cross on a closed candle, trade in the direction of the bigger move, and keep the stop where the rule put it. When a stop is hit, the stop did its job. It kept that loss to 1R, as planned. Low risk level here means a wide stop. Small wiggles rarely reach it, so it is hit less often. To try it, open Paper Trading and turn on EMA 20 and EMA 50 in Indicators. Write down the 3 prices before you place an order for 1 lot.