5 EMA Positional Trading System

5 EMA Positional Trading System

by
Mohammed Javed Akhtar
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5 EMA Positional Trading System

Calculating the EMAs

1. The formula for EMA is = Previous EMA + 0.33*(Today's Number Previous EMA). The
very first number would be the simple average of 5 day numbers.
2. Calculate 5 EMA of (i) Daily Low (ii) Daily High and (iii) Daily Closing Price of the
given underlying asset. In case an underlying has both the last trading price and
Adjusted Closing Price, one might use Adjusted Closing price.

Calculating the Target:

1. The target would be calculated as follows:
Key Babsonian Number = EMA of Daily Highs - EMA of Daily Lows;
2. For Long Positions ; Add Key Babsonian Number to EMA of Daily Highs. For example,
suppose S&P CNX Nifty is trading at 5025, the EMA of Highs is, suppose, 5000 and EMA
of lows is, suppose, 4950, then key would be,
Key Babsonian Number= 5000 - 4950 = 50. Add 50 to EMA of Daily Highs,
that is, 5000, the target would be 5050. For second target add again, 5050 + 50 =
5100, for third target, add again, 5100 + 50 = 5150, and so on.
3. For Short Positions ; Subtract Key Babsonian Number from EMA of Daily Lows. For
example, suppose S&P CNX Nifty is trading at 4925, the EMA of Highs is, suppose,
5000 and EMA of lows is, suppose, 4950, then key would be,
Key Babsonian Number= 5000 - 4950 = 50. Subtract 50 from EMA of Daily Lows,
that is, 4950, the target would be 4900. For second target subtract again, 4900 - 50 =
4850, for third target, subtract again, 4850 - 50 = 4800, and so on.

Calculating the Stop Loss:

1. The 5 EMA of Daily Closes would be the Stop Loss in all cases.

The Actual Trading Method:

For Long Trades
1. So, the 5 EMA of Daily Low, Daily High, And Daily Close, would be used for tomorrow
or the second day from today or next trading session, that is, they would be
displaced by a count of 1.
2. The word tomorrow or the second day from today should be understood as next
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5 EMA Positional Trading System

3.

4.
5.
6.

trading session, whenever that would be.

Suppose tomorrow or the second day from today, after one hour of trading, the
Underlying asset is trading above the 5 EMA of Daily Highs, buy futures contract. The
Stop Loss would be the 5 EMA of Daily Closes. If the target is not met, carry forward
to next day.
Tomorrow after the market closes, calculate all three EMAs once again with the
tomorrow or the second day from today's data.
Day After Tomorrow, that is third day from today, the new target and Stop Loss
should be used, which would have been calculated using the tomorrows data.
About 40% of the time the target would be met the same day. 25% of the time it
would be met the following day. And the rest of the time Stop Loss is going to be
triggered. The overall profits are going to beat the underlying that is being traded,
no matter whether the underlying asset is moving up, down or sideways.
For Short Trades

1. So, the 5 EMA of Daily Low, Daily High, And Daily Close, would be used for tomorrow
or the second day from today or next trading session, that is, they would be
displaced by a count of 1.
2. The word tomorrow or the second day from today should be understood as next
trading session, whenever that would be.
3. Suppose tomorrow or the second day from today, after one hour of trading, the
Underlying asset is trading below the 5 EMA of Daily Lows, sell futures contract. The
Stop Loss would be the 5 EMA of Daily Closes. If the target is not met, carry forward
to next day.
4. Tomorrow after the market closes, calculate all three EMAs once again with the
tomorrow or the second day from today's data.
5. Day After Tomorrow, that is third day from today, the new target and Stop Loss
should be used, which would have been calculated using the tomorrows data.
6. About 40% of the time the target would be met the same day. 25% of the time it
would be met the following day. And the rest of the time Stop Loss is going to be
triggered. The overall profits are going to beat the underlying that is being traded,
no matter whether the underlying asset is moving up, down or sideways.

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