Two EMA's + Bullish Engulfing Trading Strategy -- with David Moadel
hello and welcome to looking at the markets with David Modell gonna give you
a strategy today that involves two moving averages and a particular
candlestick pattern a two candlestick pattern and you can try it out I
recommend before you commit any real money to it that you demo or virtual
trade it with no money no real money just to make sure that works because no
strategy here nothing that we're talking about today works on two percent of the
time okay this is not a perfect strategy does not work every time so please be
aware of that all right also before we get started make sure you have a trading
or investing plan don't just use a strategy because you've heard about it
in a video okay I want you to have a plan for what you're doing and if you'd
like some help with putting together a trading or investing plan or if you just
want help with candles or moving averages or anything like that you can
email me for coaching my email address is David Modell at gmail.com so let's
get into it this is trading view for the charting and this is AMD Advanced Micro
Devices stock the daily one-day candlestick chart each candle represents
one day of price action but everything I'm talking about today could be used
with really any timeframe the one-minute candles 2 minute 5 minute for our
candles whatever it is because the lines the moving averages will adjust to
whatever timeframe candlesticks you're using but again this does not work 100%
of the time it's not perfect alright so what do I have up there I have two EMAS
two exponential moving averages I've got the 20-period moving average and green
here that one moves a little slower and then I've got the 8 period EMA
moving average and that's in red re and that moves a little bit faster alright
so again the 8 EMA is in red the 20 EMA is in green and so what am I going to do
well first of all I'm not going to take a long trade I'm not going to buy unless
the candle is closes I should say unless the candle closes above the green line
all right so if green means go okay so that's why I made it green the green
line don't go don't go along until a candle closes above that green line
that's not when you buy but that's the first thing you're going to look for ok
so as we can see candle closed above the green line here and here and here and
here and here alright so I started watching here I didn't go long yet I
didn't buy yet but I started considering it now you're gonna look for something
else you're gonna look for a bullish engulfing pattern it's a two candlestick
pattern where the top of the body is higher than the top of the previous
candles body and the bottom of the body is lower than the bottom of the previous
candles body okay and so where do you find this it has to be green it's got to
be a green candle otherwise it's not bullish well actually find it here with
these two candles alright so let me do a little close-up here all right so this
one's red that's not bullish and golfing this one's red this one's red this one's
green not only is a green but look at the bottom of the body it is lower than
the bottom of the previous candles body and look at the top of the body it is
higher than the top of the previous candles body okay we're only looking the
bodies we're not looking at the wicks or shadows alright so it engulfs entirely
the previous candles body this body engulfs the previous candles body and
it's green so in other words it it opened lower than the previous day's
open and higher than the previous day's close
that's another way of explaining it all right and just make sure that it closed
above the green line which it did okay otherwise that would invalidate it and
you wouldn't you would not take the long trade all right so it's closing above
the the the green line the 20 ema20
and you would probably want to wait until almost the end of the day since
this is a daily candlestick chart you might wait let's say 5 or 10 minutes
before the close so that you can be sure or pretty sure that's going to be
bullish engulfing because you don't really know whether it's bullish
engulfing until you know that it's closing above the close of the previous
candle right you don't want to do a lot of guesswork here all right you want to
be pretty sure or definitely sure that it's going to close above the previous
day's close all right otherwise it's not bullish and golfing
so you would take the trade and then you would stay in the trade you'd ride it up
hopefully up okay and how would you get out of the trade well when it closes
below the red line that's why I made it red here okay that's you know if green
means go red would mean stop right and so wait
until it closes not this one see where's the closed it's not here it's here this
is green all right the top of the body is where it closed so it's still closing
above the red line still still closing above the red line still and you can see
your gonna ride it up up up and this one you could have gotten out here if you
weren't sure then the next day confirmed it but really this one really I know
it's hard to tell because the candles on top of the line but really it closed
below the below the red line here below the eight period EMA here so you would
have gotten out in a pretty good place even if you were kind of iffy about this
the okay fine then the next you would have gotten out here all right
for a nice run up and it gets you out nice and early so it's not super risky
now since it doesn't work perfectly there is risk involved I want you to be
aware for example if there's let's say you're in the trade and then the next
day there's a huge gap down the next day you know you wake up the next morning
and it gaps way down here and you take it you could take a big loss in that
instance all right so be aware it's it's not risk-free but this strategy is
interesting because what you have is you're getting in with the trend okay
you're getting in on an uptrend you're riding it hopefully for a long time
that's the idea that's where the money's made right and then the redline gets you
out oftentimes not always but oftentimes the redline the eighth period EMA will
get you out quicker as you can see here then the 20-period EMA alright because
it's usually higher if there's an uptrend going on alright and that
bullish engulfing pattern is oftentimes just a nice nice signal not perfect but
nice letting you know that the Bulls are ready to take control here and indeed
they did here with AMD stock for quite a while alright so this is just one
example you know test it out with demo trading or demo or virtual trading
without using real money make sure it works for you before you even consider
committing committing any real capital to this all right
well I hope this was helpful to you it's just an idea and see if it works for you
alright but again have a plan for your trading for your investing if you'd like
some help with that you can email me for coaching my email address is right there
on the screen David Modell at gmail.com I hope this was useful to you alright so
thanks a lot and I will talk to you again soon
you