HOW TO TRADE THE 5 AND 13 EMA IN CRYPTO CURRENCY?
Summary
TLDRThis video script offers insights into trading cryptocurrencies using the 5 and 13 EMA (Exponential Moving Averages). It explains the significance of these indicators in identifying market trends and volatility, and provides strategies for taking profit or exiting trades based on their crossovers and price deviations. The presenter emphasizes the importance of combining these moving averages with other technical analysis tools for a comprehensive trading approach.
Takeaways
- 📈 The video discusses using the 5 and 13 EMA (Exponential Moving Averages) to trade in the crypto market.
- ⏰ The importance of understanding the relationship between the 5 and 13 EMA and their behavior in relation to price movements is emphasized.
- 🔍 The script explains that when price deviates from the moving averages, it implies volatility and a potential return to the mean.
- 📊 The concept of 'mean reversion' is introduced as a key concept for understanding moving averages.
- 🟡 The 5 EMA is represented by the yellow line and the 13 EMA by the red line in the video's chart examples.
- 🚀 A common trading rule mentioned is to consider going long if the price is above the 5, 13, and 50 EMAs, and short if below.
- 📉 The video suggests using the crossover of the 5 and 13 EMAs as a signal for potential trade exits or entries.
- 🕒 The difference in signal clarity between the hourly and 15-minute time frames is highlighted, with the latter providing earlier indications.
- 📌 The script stresses the importance of confirming trade signals with additional indicators like RSI and candlestick patterns.
- 🔄 The video explains how to use the 5 and 13 EMA to identify potential entry points for long positions, including watching for price stabilization and crossovers.
- 🛑 It cautions against solely relying on the 5 and 13 EMA for trading decisions, as they are part of a larger 'hybrid system' that requires confluence of multiple factors.
Q & A
What are the two moving averages discussed in the video?
-The two moving averages discussed in the video are the 5 EMA (Exponential Moving Average) and the 13 EMA.
What does EMA stand for?
-EMA stands for Exponential Moving Average, which is a type of moving average that places a greater weight and significance on the most recent data points.
Why are moving averages important in trading?
-Moving averages are important in trading because they help smooth out price data to identify trends and can be used to determine entry and exit points for trades.
What does the video suggest if the price is above the 5, 13, and 50 EMAs?
-If the price is above the 5, 13, and 50 EMAs, the video suggests that traders should only be considering going long, or buying the asset.
What is the significance of the 5 and 13 EMA crossing over?
-The crossing over of the 5 and 13 EMA can signal a potential change in the trend. If the 5 EMA crosses over the 13 EMA to the downside, it might indicate a bearish trend, while a crossover to the upside could suggest a bullish trend.
How can the 15-minute time frame be used in conjunction with the 5 and 13 EMA?
-The 15-minute time frame can be used to get a more granular view of the market action and to spot potential entry or exit points earlier than on the hourly time frame. It can help traders to react more quickly to changes in the 5 and 13 EMA.
What is meant by 'mean reversion' in the context of moving averages?
-Mean reversion is a concept in finance that suggests that asset prices and returns eventually move back towards their mean or average. In the context of moving averages, it refers to the idea that price will return to the level of the moving average after a period of deviation.
How can the behavior of the 5 and 13 EMA be used to determine a potential exit point for a profitable trade?
-Traders can use the behavior of the 5 and 13 EMA to determine a potential exit point by watching for the price to close below both EMAs and for the EMAs to cross over each other. This could indicate that the upward momentum is slowing and that it might be time to take profits.
What is a 'vector candle' mentioned in the video?
-A 'vector candle' is not a standard term in trading, but it seems to refer to a candlestick pattern that shows a strong directional move, either up or down, which can be used to identify potential trend reversals or continuations.
How does the video suggest using the 5 and 13 EMA to establish an entry point for a trade to the upside?
-The video suggests looking for the 5 EMA to cross over the 13 EMA and then for both to cross over the 50 EMA as a potential entry point for a trade to the upside. Additionally, watching for a retrace back towards the EMAs and a stabilization of price can also indicate a favorable entry point.
What is the 'hybrid system' mentioned in the video?
-The 'hybrid system' mentioned in the video is not explicitly defined, but it appears to be a trading strategy or system that incorporates multiple indicators and factors, including the 5 and 13 EMA, to make trading decisions.
Outlines
📈 Introduction to Trading with 5 & 13 EMAs
The video script introduces the concept of using the 5 and 13 exponential moving averages (EMAs) for trading in the cryptocurrency market. It explains that EMAs are indicators of price trends and emphasizes the importance of understanding the relationship between these two specific EMAs and their behavior in relation to candlesticks. The speaker provides a brief explanation of EMAs and suggests that viewers can learn more about them through online resources. The script mentions a hypothetical trading scenario to illustrate how to use the 5 and 13 EMAs to determine entry and exit points in trades.
🚀 Utilizing 5 & 13 EMAs for Profit and Exit Strategy
This paragraph delves into how traders can use the 5 and 13 EMAs to maximize profits and determine when to exit trades. It discusses the common rule of thumb for trading decisions based on the position of the price relative to these EMAs. The script provides an example of a long trade and explains how to use the EMAs to identify when to take profits or close a trade. It also touches on the concept of mean reversion in trading and how price deviations from the EMAs can signal volatility and potential price corrections.
🔍 Analyzing EMA Crossover and Price Behavior
The script explains the significance of EMA crossovers and how they can be used to analyze price movements and potential trading opportunities. It discusses the importance of observing the 5 and 13 EMAs on different time frames, such as the hourly and 15-minute charts, to get a clearer picture of market trends. The paragraph also highlights the use of vector candles to understand market maker behavior and the potential for stop hunts, which can influence trading decisions.
📉 Establishing Momentum and Entry with 5 & 13 EMAs
This section of the script focuses on using the 5 and 13 EMAs to establish the direction of momentum and identify entry points for trades. It describes how to wait for the 13 EMA to cross below the 50 EMA as a signal for potential downward momentum and the importance of a retest and continuation pattern to confirm this trend. The speaker also discusses how to exploit the behavior of the EMAs to establish an entry to the upside, emphasizing the need to look for price stabilization and patterns like the 'W' formation on the RSI.
🤑 Profit Taking and Trade Management with EMAs
The final paragraph of the script discusses strategies for profit taking and trade management using the 5 and 13 EMAs. It explains how to monitor the behavior of the EMAs and price action to decide when to close profitable trades. The speaker advises viewers to pay attention to the 15-minute time frame in addition to the hourly frame for more precise trade management. The script concludes with a reminder that the 5 and 13 EMAs are part of a larger trading system and that traders should consider multiple factors before making a trade.
Mindmap
Keywords
💡EMA
💡5 EMA
💡13 EMA
💡Crossover
💡Momentum
💡Mean Reversion
💡Volatility
💡Retrace
💡Hybrid System
💡Confluence
💡Vector Candle
Highlights
Introduction to the concept of the 5 and 13 EMA for trading crypto.
Explanation of EMA as an acronym for Exponential Moving Average.
Basic principle of moving averages in relation to price volatility and mean reversion.
Importance of the relationship between the 5 and 13 EMA for trading decisions.
Use of 15-minute and hourly time frames for analyzing Bitcoin perpetual charts.
Rule of thumb for long positions when price is above the 5, 13, and 50 EMA.
Strategies for taking profit based on the behavior of the 5 and 13 EMA.
How to determine an exit on a profitable trade using EMA crossovers.
The significance of price deviation from moving averages indicating volatility.
Mean reversion concept and its application in trading strategies.
Differentiating between the hourly and 15-minute EMA for more precise trading signals.
The role of market makers in bringing price back to the moving averages.
Using the 5 and 13 EMA to establish entry and exit points in a trade.
Analyzing the impact of price expansion from EMAs and its implications for trading.
How to interpret the retest and continuation pattern using EMAs.
The importance of confirming EMA crossovers with price action for reliable trading signals.
Combining EMA analysis with other technical indicators like RSI for a hybrid trading system.
The concept of exploiting the behavior of the 5 and 13 EMA for establishing an entry to the upside.
Guidance on closing profitable trades by monitoring the 5 and 13 EMA and price action.
Emphasizing the importance of considering multiple factors before making a trade in the hybrid system.
The video's aim to provide a comprehensive understanding of using the 5 and 13 EMA in trading.
Transcripts
[Music]
yo yo yo what's good guys how are we
this evening okay let's make it short
and sweet guys
tonight's video is talking about the 5
and the 13 ema and how you can use these
two moving averages to trade crypto okay
now let's get a bit of housekeeping done
if you are new to the channel be sure to
like and subscribe and all my pattern
watchers let's have a conversation man
let's go
so
5 and the 13 ema now let's understand
what we're talking about here the emas
ema is an acronym for exponential moving
average okay now if you really want to
find out more about what a moving
average is
it's just the distance and the journey
that price travels before it comes back
into the mean or the normal zone that
price behaves at okay i'm not going to
dive too deep into the dynamics of
exactly what is a moving average google
can help you do that
but in tonight's video we're going to
talk about how we can really
capitalize on understanding the
relationship between these two moving
averages okay and how we can extract
profit
by understanding the behavior
from these two moving averages in
relation to the candlesticks okay
so
looking at the chart you can see we've
got the 15 minute time frame on bitcoin
perpetual okay
i need to bring it back to the hourly to
keep it right and consistent so
here we go
the 5 is the yellow
line
and the 13 is the red line
now these are the two moving averages
that we do place a lot of focus on on
the streams okay we understand how in
order to work out whether to take profit
or to determine an exit on a losing
trade or a profitable trade we need to
understand the relationship between
these two moving averages now with
moving averages okay there is a common
theme
every time you see price
deviate away from the moving averages it
implies volatility it's moving away from
the norm
okay
now if there's something that you want
to understand about moving averages in a
more of a deeper concept or should i say
a mathematical aspect you might want to
explore mean reversion okay now this is
the phenomena of when price moves away
from one point and it always ends up
coming back into the mean now whatever
mean it is that you decide to trade from
okay
you can see how price comes back to the
five ema right there it comes back to
the 13 and it comes back to the 50 as
well
and you'll also see on higher time on
higher moving averages as such you can
see it's come back to the five come back
to the 13 it's come back to the 50 it's
gone back to the 200 and in some
instances we do see price come back
towards the 800 ema in some instances
which you can see
just shy of right here as well you can
see that how it's come back towards that
zone right there all right but tonight's
video is just going to help you try and
understand the relationship between the
5 and the 13 ema and why these two
moving averages really do give you the
story as to what may be happening next
with price okay
and moving forward from that i'll be
doing another video which talks about
the 50 and the 200 okay so let's get
straight into it
so
the 5 and the 13.
common rule of thumb is this
if price is above the five and the 13
and the 50 ema you will only be
considering going long
likewise if price is below
the 5 and the 13 and the 50
you would consider going short now
i'm going to focus a little bit more on
the 5 and the 13 ema
now
a lot of people have asked me questions
and they've said look tino i'm in a
profit you know how will i know to get
out you know what point do i take a
profit and i always say to them look at
what the 5 and the 13 ema are doing so
here's a hypothetical scenario all right
say you entered long
right here okay
so price is above the 50 ema is above
the 5 and above the 13.
you're riding this long it's going up
it's going up okay you get this one big
push to the upside all right you're now
thinking is it going to con continue to
go higher you know what point do i
disconsider starting to close my trade
well we need to understand something
what has price done
the first alarm bell is price has
expanded away from the moving averages
even the 5 and the 13 let alone the 50.
so we know volatility has come into this
move so we understand that at some point
they need to bring it back into the fray
now without diving into too much detail
about why price really needs to come
back into the zone and why it's come
back and recovered the green vector
candle okay just solely on the 5 and the
13 ema okay the market makers need to
bring price back into a zone which can
trigger interest again now if you're the
trader that's trying to work out whether
you should close your profitable trade
or you're losing trade okay
let's look at a profitable trade say you
did go long and you caught this move to
the upside and you are in this zone
right here what are you waiting for
you're waiting for price to close below
the 5 and the 13 ema
but also you're waiting for them to
cross over look you can see right there
that the 5 and the 13 ema have crossed
over now this is the issue
the crossover would have happened at the
close of this candle
so what do you do are you going to leave
them profit that you had up here and
wait until the 5 and 13 cross over
well we're on the hour time frame ladies
and gentlemen
so let's drop down the time frame
let's go to the 15 minute time frame
what can we see
well we can see the 5 and the 13 am are
pretty stagnated
coupled with the understanding of the
vector candles you can see that this was
a stop hunt rise the green vector candle
failed to close at the highest point and
the next red candle after it
didn't show any confirmation of a follow
through
the crossover happened here
and that's on the 15-minute time frame
now just look at the difference
if i mark off
the crossover there
okay
and then go back to the hourly
and look at the crossover
on there
it's bright as day isn't it
the difference between seeing it on
a lower time frame
so the 15 minute time frame which is a
quarter of the time of an hour
and then you've got the hourly crossover
all right
now this is where it can get a little
bit tricky
if you're in the belief that price is
going to continue higher from this point
do you decide to hold your trade
and when it pulls back to a moving
average anticipate another move to the
upside so you're going to add to your
position from here now if you were lucky
enough and you're able to do it from
here then fine okay
but where price is right now
it has been rising for quite some time
and it hasn't well it did show a clear
break to the upside but it looks like
now that we've formed this m formation
and price aggressively comes down
so it's like the market makers are
effectively saying right we need to get
a quick dump and build some more longs
at the lowest possible point
at the highest point in the chart so
that we can get an opportunity to move
price higher again now it is the weekend
so things are a little bit chaotic all
right
but you can see the difference between
the 5 and the 13 ema on the hourly on
the take profit
and the 5 and 13 ema on the 15 minute
time frame okay so that's one of the
factors with the 5 and the 13 ema if
you're looking to take a profit off the
basis of these moving averages consider
what the 15 minute time frame is doing
after you've consulted what the one hour
time frame has done okay
always keep an eye on the 15 minute
because the crap thing is guys this is
on the basis of hindsight okay when
you're dealing with it in real time how
can you really understand whether or not
price is going to cross over the moving
averages or not well let's look at it
like this look what's happened now
the 5 and the 13 ema have now crossed
over to the downside
price is now below the 50 ema
the 13 emas crossed over the 50 ema and
that also has happened on the one hour
time frame nearly sorry
price isn't working the sorry the 13 ema
is working on crossing over the hourly
is the trend to the upside over
is momentum building to go down lower
we will only know once the 13 ema
crosses over the one hour 50 ema okay
this is a fast move okay
so don't get fooled by it the market
makers may be trapping traders to going
short
they've already recovered the long
liquidation points from this candle
right here we've also got this candle
right here as well
look at this we've got this zone right
here could the market make us bring
price back down again
could they bring it back down to the 200
ema before they then decide to make
another move back up look at where
they're marking up price look at how
they're getting busy towards the 50k
zone yeah 50k is up here guys they're
trying to get their orders as many of
those orders below the key 50k mark
because once we get to that point we'll
be approaching all-time highs near
enough with bitcoin it's not too far
away it's only 64.65
okay
use the one hour 5 and 13 ema to
determine the direction of momentum
once the 13 ema crosses over the 50 on
the one hour to the downside you
everything is looking to go down lower
but what are you waiting for to finalize
that intention
you are waiting for a retest
continuation that is critical into
applying the 5 and the 13 ema crossover
wait for the retest of that zone
look at this
look what happened here
okay
if i zoom in you will see it
price
comes down crosses over the 50 ema
yeah
13 and the five are pointing downwards
all right
then you see price stabilize
price then comes back up touches the 5
and the 13 and the 50
and then pulls straight back down again
if we consider what actually just
happened
you've got it
drop
retrace continuation to the downside
all right
now the reason why i didn't use this
zone is because the 5 and the 13 ema
were still above the five the sorry was
still above the 50.
it's when it goes below the 50 and then
the 5 and the 13 ema in terms of price
when it's below it
you then consider the retrace back up
towards the moving average
so you're looking for the 5 and the 13
ema to break down once they break below
the 50 ema momentum is favoring lower
prices once it starts to make an
aggressive move away from the 5 and the
13 ema expect to retrace back to the 50
at some point to seal the intention that
price or sorry the 15 sorry sorry the 13
ema crossing over the 50 you want
confirmation of that and that
confirmation is right here where price
reverses back up to the 50 and then
drops lower
all right
let me say that again
in order to establish momentum to the
downside wait for the 13 ema to cross
over the 50 ema to the downside
when the 13 and the 5 expand after
they've crossed over the 50 wait for the
first retrace back towards the 50 ema to
determine if the momentum to the
downside is favorable
price drops comes back up and then it
drops down lower
now
this is where it gets a bit interesting
how can we exploit the five and the
thirteen ema's behavior to establish an
entry
to the upside
well first things first
look at the distance between price right
in this zone
okay
and the 50 ema
if you want to see this this discussion
in real time go and watch the last two
streams because we were talking about
this area
all right one of the streams happened
during the day on at 2 p.m on a thursday
and then we did a stream on the friday
night talking about the success of this
move
okay
so the first criteria is we are
expecting price to come back towards the
50 ema once it stabilizes after it's
making its move to the downside the 5
and the 13 ema are expanded you can see
the volatility between them they are so
wide the 50 is very wide between these
two moving averages as well so we're
expecting a pullback what are we looking
for
well we're looking for price to
stabilize
look what happened
you've got a w formation on the 5 ema
if you look down on the rsi itself you
can see a w formation on the rsi outside
the volatility band back inside the
volatility band so you've got yourself
weakness on the move to the downside all
right
once the 5 crosses over the 13 ema
that's when you need to start paying
attention
then if the 13 ema manages to cross over
the 50 ema
momentum is favoring higher prices
so there is the crossover right there
okay
now go down to the 15 am sorry the 15
minute time frame okay and just look at
what was going on there let's go back
so
how soon did the 13 ema cross over the
50 well look at it
two shark fins at the lows of the five
ema
the 5 crosses over the 13 things are
starting to change big blue vector
candle crosses and closes above the 5
and the 13 ema you're paying attention
price then comes up and comes towards
the 50 ema the 5 and the 13 are starting
to expand
you would either wait until the 5 and
the 13 crossed over the 50 because look
the 5 would cross over the 50 first and
then the 13 would follow so your entry
would be here now look at it the 5 and
the 13 ema are starting to expand now
we've got momentum to the upside price
starts to rise up
now
the interesting part is
when price has moved away from the 5 and
the 13 ema when it comes back down
towards it
wait until the 50 ema has been breached
with price
okay
because once it gets breached with price
the 5 and the 13 ema will follow
okay
but until price comes back to the 50 ema
and it stays within the 5 and the 13 ema
the volatility between the two moving
averages if it stays within those zones
you've still got a favorable move to the
upside
just pay attention to how price behaves
around the 5 and the 13 ema just look at
it
it pins it man could i get any more you
know look look at that it pins it
bang shifts away from the zone
now look expansion things are going to
start to change because it hasn't even
touched the 13 ema
if you go and study ethereum's move from
when it hit the when it broke out of the
1800 zone and then it continued all the
way up and towards the four and a half 5
000 mark
we were riding that 13 ema like it as if
it was the 50 ema
it was unbelievable to see
look at this
look at how the 5 and the 13 ema price
comes back down it goes below the 5 and
the 13 ema it doesn't come anywhere near
the 50 so things are still favorable to
the upside
okay
naturally we are expecting them to bring
price back down towards the moving
average because of how extended this
move is
they don't do it
so you're asking me well how would you
know to close a profitable trade in this
zone you would look at the vector
candles
but just also pay attention to the 5 and
the 13 ema has the 5 crossed over the 13
ema no because if you were sat in all of
this you would have seen how the 5 was
coming down and the 13 was coming down
and then this next candle spiked back up
which leveled off the 5 and the 13 ema
then the next candle followed through
and pushed price higher and then the 5
and the 13 edged upwards so there was no
reason to consider closing the trade at
this point because nothing had happened
now that we've had price move to the
upside here it starts to pull back
five crosses over the 13 prices below
the 13 and the five
okay it's coming down towards the 50 but
it doesn't take it so you would have
probably taken a bit of profit there but
look
this time it did cross over okay but the
third team formed the shark fin look on
the rsi itself you will see it's outside
the volatility band we expect price or
the rsi to come back into the volatility
band at some point
look shark fin on the volatility band
you expect it to come back in at some
point
expecting expect
this game is about probabilities guys
okay you have an expectation of price in
it's likely or it's not likely this is
the name of the game
all right
price then comes back up
5 and 13 ema cross over again but just
look at the behavior it's just tricky
behavior okay
expansion of the 5 and the 13 ema they
break down again they don't hit the 50.
until the 5 and the 13 violate the 50
there's no reason to close your lung
because look what you would have managed
to capitalize on this bad boy to the
upside
okay now look at where we are
let me zoom out
here we go
five has crossed over the 13 ema it's
dropped price is below it needs to come
back into the five to the 50 ema
on the 15 minute time frame look what
the rs sorry the 5 and the 13 ema doing
the five has crossed over the 13 it's
now trading above now it is friday sorry
it is saturday it's the weekend so we
don't normally tend to see decent price
action we get these spike up movements
up and down but you don't want to get
caught up in trading the moving averages
on the weekends okay unless you are
catching certain moves all right
everything now is flat across the board
okay
so i hope this video has brought some
light into understanding how to trade
the 5 and the 13 ema or should i say
certain things that you need to look for
when you are trading with the 5 and the
13 ema now remember guys these two
moving averages are part of the hybrid
system the hybrid system is a concoction
of so many more things that are required
just before you decide to make an entry
okay there are so many things that need
to be considered you can't just simply
trade holistically off the 5 and the 13
ema because you'll get thrown out many
instances okay look what happened here
you could go long on the 5 and the 13
ema expanding you'd go long here but
then you want to get stopped out
straight away because of this big red
vector candle
all right
it's all about building the story of
confluences look how we threw the
the rsi into the mix as well
all right
moving forward ladies and gentlemen i'm
going to be doing more of these videos
to help you guys understand segments of
the actual hybrid system itself
so that you can come back to these
videos if you need a refresher so that
you can understand what things need to
be applied
okay in confluence
to each other before you place the trade
okay
guys go and have yourself a wonderful
weekend if you are new to the channel be
sure to like and subscribe okay
and i'll catch you guys in the streams
take care yourselves peace
[Music]
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