HOW TO TRADE THE 5 AND 13 EMA IN CRYPTO CURRENCY?

Summary

This 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

00:00

📈 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.

05:01

🚀 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.

10:02

🔍 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.

15:03

📉 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.

20:03

🤑 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.

Keywords

💡EMA

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. In the context of the video, EMA is used as a technical analysis tool to help traders understand price trends and volatility in the cryptocurrency market. The script mentions the 5 and 13 EMA as key indicators for making trading decisions.

💡5 EMA

The 5 EMA refers to a 5-period Exponential Moving Average, which is a shorter-term trend indicator used in trading. It is one of the two EMAs primarily discussed in the video. The script uses the 5 EMA to illustrate how traders can identify entry and exit points in the market based on its relationship with the price action and the 13 EMA.

💡13 EMA

The 13 EMA is a 13-period Exponential Moving Average, which is a slightly longer-term trend indicator compared to the 5 EMA. It is the second EMA discussed in the video. The script explains how the 13 EMA, in conjunction with the 5 EMA, can be used to determine the direction of the market and to manage trades effectively.

💡Crossover

A crossover in trading terms occurs when one moving average crosses over another. In the video, the crossover of the 5 and 13 EMA is highlighted as a critical event that signals a potential change in market direction. The script provides examples of how traders can use crossovers to decide when to enter or exit trades.

💡Momentum

Momentum in trading refers to the strength or speed of a price movement. The video discusses how the relationship between the 5 and 13 EMA can indicate the momentum of the market. For instance, when the 13 EMA crosses below the 50 EMA, it suggests a potential downward momentum, which is a key factor in determining trade direction.

💡Mean Reversion

Mean reversion is a theory in finance that suggests prices and returns will tend to move back towards the mean or average over time. The script briefly touches on this concept to explain the behavior of prices in relation to moving averages, stating that prices often revert back to the mean after a period of deviation.

💡Volatility

Volatility in the context of trading refers to the degree of variation of a trading price series over time. The video script mentions that when the price deviates from the moving averages, it implies increased volatility, signaling potential market instability or significant price movements.

💡Retrace

A retrace in trading is a price movement in the opposite direction of the prevailing trend, often seen as a temporary pause before the trend resumes. The script explains how a retrace to the EMA can be used as a confirmation of the trend's continuation, particularly after a significant price movement.

💡Hybrid System

The term 'hybrid system' in the script refers to a trading strategy that combines multiple analysis tools and indicators. It is mentioned that the 5 and 13 EMA are part of this system, suggesting that they should not be used in isolation but in conjunction with other elements for effective trading decisions.

💡Confluence

Confluence in trading means the simultaneous occurrence of multiple technical or fundamental signals that point towards the same market direction. The video script emphasizes the importance of looking for confluences when using the 5 and 13 EMA to make trading decisions, as it can increase the probability of a successful trade.

💡Vector Candle

A vector candle is a term used in the script to describe a particularly significant candlestick pattern that can indicate a strong directional move. The video mentions the importance of recognizing these patterns in conjunction with EMA analysis to better time trade entries and exits.

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]