We have studied 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.
Now it is time to recognise that and EMA50 pullback on one timeframe is an EMA9 pullback on the one above it. This means that when an M2 EMA Dance completes, the M2 EMA50 has been rendered neutral, and all price did was end the M10 EMA9 trend, meaning that the same EMA Dance may now commence towards the M10 EMA50 instead.
In other words, our understanding of price action informs us to zoom out when the trend on the current timeframe has failed and ended.
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
M2 EMA50 = M10 EMA9
M10 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 next few articles of this fourth series of articles, we will look at these inter timeframe relationships in detail.