Why the EMA Indicator Fails (And How Price Action Wins)
Why the EMA Indicator Fails (And How Price Action Wins)
The Exponential Moving Average (EMA) promises to track price trends but often leads to delayed and unprofitable trades. After seven years of trading and millions in profits, I’ve learned that Price Action Trading is the key to generating $1,000–$1,500 weekly in the $6.3 trillion Forex market. In this guide, I’ll explain why the EMA indicator is unreliable, compare it to other flawed indicators, and show you how to trade profitably with Price Action, plus a real trade example to prove it.
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1. What is the EMA Indicator?
The Exponential Moving Average (EMA) is a technical indicator that tracks the average price of a currency pair, giving more weight to recent prices to follow trends “exponentially.”
Key Characteristics:
Function: Smooths price data to identify trends, acting as a dynamic support/resistance level that moves with the market.
Common Use: Traders buy when price is above the EMA and sell when below, assuming it signals trend direction.
Setup: Applied on TradingView (e.g., 20-period EMA), it follows price with a slight lag.
The EMA sounds simple, but I found it lacking after testing thousands of indicators—it’s not the “holy grail.”
2. Why the EMA Indicator Fails
The EMA, like other indicators, is delayed, oversimplified, and often misleads traders, reducing profitability.
Flaws of the EMA:
Lagging Signal: The EMA trails price, giving late entries and exits. By the time price crosses the EMA, the trend may already be reversing.
Oversimplification: Buying above or selling below the EMA ignores market structure, candlestick patterns, or support/resistance, leading to low-probability trades.
Cluttered Charts: Combining EMA with other indicators obscures raw price action, making it hard to read candlesticks.
I wasted hours backtesting EMAs, only to find they offered no edge over raw price data. Price Action is far superior.
3. Comparing EMA to Other Flawed Indicators
The EMA shares the same pitfalls as other popular indicators like RSI, Bollinger Bands, and Fibonacci Retracements, all of which complicate trading without delivering consistent results.
Indicator Breakdown:
RSI (Relative Strength Index): Signals “overbought” or “oversold” conditions, but markets can stay “too high” or “too low” indefinitely, rendering it unreliable.
Bollinger Bands: Trap price between bands, suggesting sells at the top and buys at the bottom, but signals are delayed and clutter charts.
Fibonacci Retracements: Predict pullbacks (e.g., 50%, 38.2%) with subjective zones, offering no clear entry and deemed “fugazy” by experienced traders.
Like the EMA, these indicators are excessive, delayed, and no match for Price Action’s clarity.
4. Why Price Action Trading Wins
Price Action Trading uses raw price data—candlesticks, market structure, and support/resistance—to make precise, chart-based decisions without relying on lagging indicators like the EMA.
Benefits of Price Action:
Simplicity: Focus on candlestick patterns (e.g., bullish engulfing) and market structure (higher highs/lows or lower lows/highs) for clear signals.
Precision: Enter trades at areas of interest (support/resistance with 3+ rejections) with defined stop-losses (5–10 pips) and take-profits (1:2 ratio).
Reliability: Trade with the trend using top-down analysis (weekly to 2-hour charts), avoiding the EMA’s lag.
Price Action delivered wins like $110,000 in a single day by keeping my charts clean and focused.
5. Real Trade Example: EUR/GBP Price Action Trade
Here’s a Price Action trade I took without the EMA, using candlesticks and market structure during the London session, generating $336 in 7 minutes:
Trade: Buy EUR/GBP on a 2-hour timeframe at the London session open (3:00 AM EST).
Setup: Daily chart showed a bearish trend (lower lows/highs) bottoming out via top-down analysis. A support level (area of interest) with 3+ rejections formed, marked as a higher low (HL). A bullish engulfing candlestick confirmed the buy signal on the 2-hour chart, no EMA needed.
Entry: Used TradingView’s long position tool on a $5,000 demo account (1:50 leverage). Risked 2% ($100) with a 15-pip stop-loss (5 pips below support) via MyFXBook’s position size calculator (0.53 lots). Take-profit set at the next resistance (30 pips) for a 1:2 risk-reward. Spread was 3 pips due to high-volume session.
Psychology: Avoided EMA clutter and FOMO, staying disciplined with a clean chart and precise candlestick setup.
Result: Profited $336 on MetaTrader 4, closed manually to demonstrate, shared live with my community. No slippage occurred.
Profit Screenshots: My students see results like $1,000, $2,000, even $10,000 weekly with Price Action. Join my course to access these setups!
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Final Thoughts
The EMA indicator, like RSI and Fibonacci, is a lagging, oversimplified tool that complicates trading and fails to deliver consistent profits. To generate $1,000–$1,500 weekly, ditch the EMA for Price Action with these principles:
Avoid EMA: Its delayed signals and oversimplified rules (buy above, sell below) lack precision.
Use Price Action: Trade candlestick patterns at areas of interest (3+ rejections) with market structure.
Trade London/New York: High volume ensures low spreads and momentum.
Stay Disciplined: Maintain a 1:2 risk-reward ratio and 1–2% risk per trade, avoiding shiny object syndrome.
Ready to trade like a pro? Join my 5-Day Trading Mini-Course to learn my candlestick-based Price Action strategy and trade with a community generating massive profits weekly.
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