Understanding the EMA50 RT

RT Concepts Appendix 1

When concepts are to closely related to price action, we can sometimes lose ourselves in some form of cognitive bias, where the system tells out that the following edge in the sequence is next, and then we may forget that price still has to meet our parameters before we can actually confirm that all criteria for the trade have been met.

Experience in the Discord showed me that when the EMA50 Push is done, readers automatically expect the EMA50 RT, but the criteria for this technical edge are very clear, and you can never allow yourself to become complacent. Always keep your eyes on what the chart tells you.

Confusion about the EMA50 RT

It is important to remember that an EMA50RT becomes relevant when an EMA50 Push rejects price and attempts continuation of the underlying trend.

In the chart below, we see a downtrend and a retrace into EMA50 where the EMA50 Push sent price looking for continuation of the trend. As per my instructions on these concepts, EMA9 has to lead now.

ONLY the FIRST backtest of EMA9 can set up an EMA50 RT. If price continues the trend after that first backtest, then we have to stop looking for an EMA50 RT and look for a new EMA9 reversal instead.

Allow me to illustrate with an example.