Dynamic Trend Following
EMA Relationships Across Timeframes
In the first and second course, we have looked at the relationship between EMA9 and EMA50, and how EMA21 is the barrier between them. We’ve worked through concepts that allow us to participate in the repeatable dynamics between EMA50 and EMA9. For this third and final stage of the trading courses, we will have a look at how EMA dynamics work across timeframes.
With one simple image, this is what I am talking about:
The concept is fairly simple. I always insist that H1 EMA50 = H4 EMA9. Mathematically, it is easy to calculate that this is not an accurate assessment, but I’ve mentioned before that I treat EMA Clouds as zones. So when price loses H1 EMA9 after a reasonable uptrend, it reverts to the mean, EMA21, and if lost, it hits EMA50 where we look for the EMA50 Push. Effectively, this allows us to buy into continuation of the H4 EMA9 uptrend, where the hourly was a mere pullback.
Here is how that looks on chart:
This is a strong daily uptrend (right hand side), with an H4 EMA9 uptrend (centre), and the hourly losing the EMA9 regularly, but bouncing on H1 EMA50 for continuation. Ultimately, when price lost H4 EMA9, it hit H4 EMA50 and D1 EMA9 simultaneously, the same way it hit H1 EMA50 and H4 EMA9 simultaneously.
In my system, I use the following references:
M1 EMA50 = M5 EMA9
M5 EMA50 = M10/M15 EMA9
M10/M15 EMA50 = H1 EMA9
H1 EMA50 = H4 EMA9
H4 EMA50 = D1 EMA9
D1 EMA50 = W1 EMA9
W1 EMA50 = MO 1 EMA9
I have to say that M10/M15 are somewhat of an ‘in between' timeframe, and M30 is useful as well, as during turns, each of these EMA50's will interact with price, but as a rule, the M5 timeframe communicates directly with H1. For example, an M5 EMA50 box typically lasts 8 to 12 candles, which is one to one and a half hour. When an M5 EMA50 box breaks out, always remember to keep an eye on H1 EMA9, to see if the setup offers a lower timeframe entry into a new hourly uptrend. More often than not, M5 EMA50 consolidations lead to significant new trends.
In the following articles of this third course, we will look at these concepts in detail. We will look at intra timeframe trend following, position building and trailing.