EMA + RSI + ADX

The trend-following theory has never been boring as it lays the foundation of many effective trending
systems which help traders collect substantial profits from financial markets. Today, we would like to
continue the series of trading the market trend with a strategy composed of three popular built-in indicators
–Exponential Moving Average (EMA), Relative Strength Index (RSI), and Average Directional Index (ADX).

Introduction

As we already know, a Forex technical system is considered qualified when it contains both leading and
lagging indicators. With our recommended strategy, the Exponential Moving Average (EMA) set of the
period of 20 days is responsible for detecting market trends and trading signals. Meanwhile, it’s not hard to
realize that the Relative Strength Index (RSI) with the setting of 25 days is used to confirm the reliability of
the defined entries. Furthermore, this system becomes more interesting with the 14-period Average
Directional Index (ADX) entering the team. As widely applied, this ADX will affirm the momentum of the
detected trends, helping traders gather more accurate trading opportunities.

Forex is seen as the most volatile market because of its daily unpredictable fluctuations. Hence, using these
three effective indicators together will make you a perfect filter eliminating effectively the jamming signals.

Having been tested by us for the last 15 months with over 200 signals, this strategy has so far brought more
than 2000 profitable pips with the win-rate confirmed around 85%.

How to use the system to trade Forex

This technique works best on the 1-hour chart and could be applied to all currency pairs. After installing the
built-in indicators in MetaTrader 4, you will have to observe the EMA (20) to identify tradable signals.

A bullish trading opportunity is spotted when:

  • Prices remain above the EMA (20).
  • The RSI line stays above 50 but below 70.
  • The ADX main line turns above the 20 level.

EMA + RSI + ADX

On the contrary, a bearish occasion is determined when:

  • Prices remain below the EMA (20).
  • The RSI line is below 50 but above 30.
  • The ADX main line breaks the 20 level to the upside.

EMA + RSI + ADX

There are some important entering rules when trading with this strategy as follows:

  • Only one position should be entered at a time.
  • You must wait for the candlestick to close before positioning any order.
  • The stop-loss level should be set of 30 pips, while the take-profit could be up to 50 pips.
  • When the RSI line trades into the overbought/oversold territory, the position should be exited.
Pros and cons of the system

This strategy has plenty of advantages. First, it’s user-friendly and is easily established. Secondly, with
three indicators working together, the strategy generates highly accurate signals by strict checking rules.
Finally, it allows traders to grab a series of market trends, helping engender plenty of profitable pips.

The only disadvantage of the system is that it requires traders to constantly monitor the platform to seek for
trading occasions.

Conclusion

With a lot of advantages shown above, this system has proven to traders its effectiveness along with
dozens of sublime benefits. But most importantly, it is based on the principles of the trend-trading theory,
which will probably help traders profit from the currency market in the long run. Anyhow, please don’t forget
that there is no technical strategy which can guarantee a 100% win-rate, therefore, let’s apply this technique
strictly with risk controlling and psychological managing methods.
See also:
‘Golden Shine’ forex trading strategy
‘Golden Shine’ forex trading strategy
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Forex trading strategy ‘Ayma’
Forex trading strategy ‘Ayma’
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