Trading technique combining Price Action and the EMA 13, 34, 89 system

Getting Started with Price Action, Supported by EMA

Many traders often start with technical indicators like EMA, but in reality, Price Action is the foundation. You need to observe how the price moves, how candles form, then use the EMA 13, 34, 89 system to confirm the main trend. That’s the correct way to work.

Understanding the Role of Each EMA Line

The EMA system consists of three main lines:

• EMA 13: The most sensitive, reacts quickly to short-term price movements, helping you catch small swings within the larger trend.
• EMA 34: Defines the medium-term trend, serving as an important marker to find safe entry zones.
• EMA 89: Represents the long-term trend, acting as a filter so you don’t go against the market.

When these three lines stack up in order (13 > 34 > 89 or vice versa), you can be confident that the trend is very clear.

The Process of Identifying Trading Opportunities

Step 1: Determine the trend

• EMA 34 above EMA 89 → The market is uptrend, prioritize looking for Buy signals.
• EMA 34 below EMA 89 → The market is downtrend, prioritize looking for Sell signals.
• EMA 34 and EMA 89 touching or horizontal → Avoid trading, the market is sideways.

Step 2: Wait for Price Action to appear in expected zones

When the price returns near EMA 34 or EMA 89, wait for characteristic candle patterns:

• Pin Bar: Candle with a long wick and small body, indicating market rejection.
• Inside Bar: Candle completely within the previous candle’s range, signaling an upcoming breakout.
• Fakey: A variation of Inside Bar, often creating strong breakouts.

These signals help confirm that the entry point is genuine, not just a feeling.

Step 3: Set risk management parameters

• Entry: As soon as the candle signal (Pin Bar, Inside Bar) closes and confirms near EMA 34 or EMA 89.
• Stop Loss (SL): Place just below the low of the signal candle (for Buy) or just above the high (for Sell).
• Take Profit (TP): Use a risk/reward ratio from 1:2 to 1:3, or close when the price hits major resistance/support zones.

Practical Example: EUR/USD

Suppose you are monitoring the EUR/USD pair on the H4 chart:

1. EMA 34 is above EMA 89, indicating a clear uptrend.
2. Price retraces and approaches EMA 34.
3. A bullish Pin Bar pattern appears, with a long lower wick but a bullish candle body.
4. You enter a Buy when the Pin Bar closes.
5. Place SL below the Pin Bar’s low, about 20-30 pips.
6. Set TP at a 1:3 ratio, meaning the profit is three times the risk.

With this approach, even if you only win 50% of your trades, a Risk/Reward ratio of 1:3 ensures long-term profitability.

Important Notes

• Avoid sideways markets: Do not enter trades when EMA 34 and EMA 89 are horizontal, as signals will be weak and noisy.
• Choose the right timeframe: Trading on H4 or D1 reduces noise compared to M5 or M15. Price Action patterns are clearer, and signals are more reliable.
• Combination is key: EMA and Price Action are not opposing tools but complement each other. EMA provides context, while Price Action offers specific opportunities.
• Patience is a skill: Wait until all factors align (trend is correct, price is in the expected zone, and Price Action patterns appear) before entering a trade. Don’t trade excessively.

Conclusion

The method of combining EMA 13, 34, 89 with Price Action is a powerful approach used by many professional traders. It helps you not only identify the trend but also find high-quality entry points, thereby reducing risk and increasing the probability of long-term wins. The key is to practice recognizing candle patterns, patiently wait for signals, and always adhere to disciplined risk management.

Note: BTC is currently trading around 86,150.42 USD, down 3.83%, but these principles still apply to any asset pair you trade.