EMA Crossover System

Concept

A classic trend-following strategy that uses the crossover of two exponential moving averages (EMAs) to identify directional shifts. The faster EMA (50-period) crossing above the slower EMA (200-period) signals an uptrend; crossing below signals a downtrend.

Setup

• Fast EMA: 50 periods (daily)
• Slow EMA: 200 periods (daily)
• Volume filter: Average volume > 500k shares
• Price filter: > $10 per share for liquidity

Entry Rules — Long

1. 50 EMA crosses above 200 EMA (golden cross)
2. Price is above both EMAs at crossover
3. Volume on crossover bar is above 20-day average
4. Enter at the close of crossover day or next open

Entry Rules — Short

1. 50 EMA crosses below 200 EMA (death cross)
2. Price is below both EMAs at crossover
3. Volume confirms
4. Enter at close or next open

Exit Rules

• Trend exit: Exit when 50 EMA crosses back across 200 EMA
• Stop loss: 1.5× ATR (14) below entry for longs, above for shorts
• Trailing stop: 2× ATR (14) from the highest close since entry (longs)

Risk Management

Risk no more than 1% of account per trade. Position size based on distance to initial stop loss. Avoid trading during low-liquidity periods (holidays, major news events).

Notes

This strategy works best in strongly trending markets. It will generate whipsaws in range-bound conditions. Consider adding a filter like ADX > 25 to confirm trend strength before entries.