EMA And MACD With Trailing Stop Loss

Introducing The 'EMA And MACD With Trailing Stop Loss' Template

An  exponential moving average  (  EMA  ) is a type of moving average (MA) that places a greater weight and significance on the most recent data points. The  exponential moving average  is also referred to as the exponentially  weighted moving average  . An exponentially  weighted moving average  reacts more significantly to recent price changes than a  simple moving average   simple moving average  (  SMA  ), which applies an equal weight to all observations in the period.

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Moving average convergence divergence (  MACD  ) is a trend-following  momentum indicator  that shows the relationship between two moving averages of a security’s price. The  MACD  is calculated by subtracting the 26-period  exponential moving average  (  EMA  ) from the 12-period  EMA  .

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The result of that calculation is the  MACD  line. A nine-day  EMA  of the  MACD  called the "signal line," is then plotted on top of the  MACD  line, which can function as a trigger for buy and sell signals. Traders may buy the security when the  MACD  crosses above its signal line and sell—or short—the security when the  MACD  crosses below the signal line. Moving average convergence divergence (  MACD  ) indicators can be interpreted in several ways, but the more common methods are crossovers, divergences, and rapid rises/falls.

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The Strategy enters and closes the trade when the following conditions are met:

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LONG

The  MACD  histogram turns  bearish 

EMA7 is greater than EMA14

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EXIT

Price increases 3% trailing

Price decreases 1% trailing

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This strategy is back-tested from 1 January 2022 to simulate how the strategy would work in a bear market and provides good returns.

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Pairs that produce very strong results include  XRPUSDT  on the 1-minute timeframe. This short timeframe means that this strategy opens and closes trades regularly

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In order to further improve the strategy, the  EMA  can be changed from 7 and 14 to, say, EMA20 and EMA50. Furthermore, the trailing stop loss can also be changed to ideally suit the user to match their needs.

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The strategy assumes each order is using 30% of the available coins to make the results more realistic and to simulate you only ran this strategy on 30% of your holdings. A trading fee of 0.1% is also taken into account and is aligned to the base fee applied on Binance.

​Pro tip: The 3-Hour time frame has proven to return the best results on average.

This strategy made 51.72% net profit on XRP/USDT on the 3-Hour timeframe from January 2022 - November 2022.

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