EMA, The correct way of usage - Part Two - Pullback
Our core belief in ARZ Trading System: Trading, is to have an "expectation" from the market. If not, at any movement, the trader will be confused! If you look at the market and don't have any expectations, don't trade! In a future article, we will discuss what to do if an expectation is not met.
In the case of Pullback, Price is not a ball, and EMA (or any other kind of S&R) is not a brick wall, especially in this case.
If you put an EMA with any period, you'll see that the price crosses it easily most of the time! Then, it might come back as a shadow or a Fake Breakout. This means we should have a confirmation system for accepting or rejecting a Pullback. Otherwise, we'll always see a pullback shaping!
Key Note 1: the higher the EMA period is, the longer will take for a pullback to shape!
Key Note 2: Never trust and trade based on just one S&R level! Always have at least 2 or 3 levels to confirm your pullback. Either in a classical way by drawing trendlines and channels, or using any kind of Indicator as a means of dynamic S&R level.
Key Note 3: a flat EMA is supposed to break easily! If not, it'll reject the price strongly. It means we have to wait for what will happen at a flat EMA to decide what to do next or expect the price will breach it (Please refer to article part one).
Key Note 4: An ascending EMA can only act as a support, and a descending one acts as a resistance, not the other way! This is critical, believe me!
Accepted ways of confirming a pullback in the ARZ System are:
1. Wait for a strong reversal pattern to shape at S&R. Never jump the gun!
2. Use a Volume Indicator like WAE (Waddah Attar Explosion) to confirm your entry at the S&R level.
In this chart:
- Pullback #1 (Bearish Engulfing) is not accepted, because it's just based on one S&R (13EMA) and the reversal pattern closed near the support of MC.
- Pullback #2 (Bullish Engulfing) is strong but closed near 100EMA. Can't trust it.
- Pullback #3 is awesome! This is a multi-candle Evening Star (Key Note 1&2), of 100EMA & Resistance of UTP & MC.
- Pullback #4 is again good but has closed near the low of MC and is risky to take.
In the case of Pullback, Price is not a ball, and EMA (or any other kind of S&R) is not a brick wall, especially in this case.
If you put an EMA with any period, you'll see that the price crosses it easily most of the time! Then, it might come back as a shadow or a Fake Breakout. This means we should have a confirmation system for accepting or rejecting a Pullback. Otherwise, we'll always see a pullback shaping!
Key Note 1: the higher the EMA period is, the longer will take for a pullback to shape!
Key Note 2: Never trust and trade based on just one S&R level! Always have at least 2 or 3 levels to confirm your pullback. Either in a classical way by drawing trendlines and channels, or using any kind of Indicator as a means of dynamic S&R level.
Key Note 3: a flat EMA is supposed to break easily! If not, it'll reject the price strongly. It means we have to wait for what will happen at a flat EMA to decide what to do next or expect the price will breach it (Please refer to article part one).
Key Note 4: An ascending EMA can only act as a support, and a descending one acts as a resistance, not the other way! This is critical, believe me!
Accepted ways of confirming a pullback in the ARZ System are:
1. Wait for a strong reversal pattern to shape at S&R. Never jump the gun!
2. Use a Volume Indicator like WAE (Waddah Attar Explosion) to confirm your entry at the S&R level.
In this chart:
- Pullback #1 (Bearish Engulfing) is not accepted, because it's just based on one S&R (13EMA) and the reversal pattern closed near the support of MC.
- Pullback #2 (Bullish Engulfing) is strong but closed near 100EMA. Can't trust it.
- Pullback #3 is awesome! This is a multi-candle Evening Star (Key Note 1&2), of 100EMA & Resistance of UTP & MC.
- Pullback #4 is again good but has closed near the low of MC and is risky to take.
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