Intraday Trading Strategies : No 5 | 9 EMA RETRACEMENT

In this “Intraday trading strategies: No 5”, we will discuss 9 EMA Retracement Strategy. This we can apply when we can expect prices to go up or down basis setup

Table of Contents

Concept

If the prices are above Moving Average, then it is assumed that market is Bullish and if it is below Moving Average, then market is Bearish.
When prices move far above or below the Moving Average, then deviation happens in prices. It is observed that prices will sooner or later move back to Moving Average.
As we are using 9 EMA in this strategy, so we will wait for deviation in prices along with bearish or bullish candlestick pattern as a second signal to enter. Candlesticks provides market sentiment information to a trader like when the market is bullish, bearish or if there are chances of reversal. These bullish and bearish candlestick patterns are helpful to a trader along with the knowledge of support and resistance.

9 EMA Retracement Trading Strategy

Entry rule

Step 1: There should be a deviation in prices. This means either prices should move far above 9 ema or far below 9 ema.

Step 2: Now we will wait for Doji or hammer candle formation which signals possible reversal.

Step 3 : After doji or hammer candle formation , calculate the range of candle . Range is high price – low prices of the candle . The distance between doji/hammer candle ( we will take closing price here) and 9 EMA line should be greater or equal to range of the candle to take the trade. This means that there should be good deviation in prices so that if price go back to moving average , a trader can take a good profit.

Intraday trading strategies Figure 1 — **Figure 1:** In this Bank Nifty chart check how the entry candle ( Doji ) range is around 55 points and there is deviation in prices at the downside . Now if we calculate the difference between this candle and 9 EMA it is around 157 points. So its a good setup to take the trade.

Step 4: Take the trade at close of the candle

Intraday trading strategies Figure 2 — **Figure 2 :** In this Bank Nifty chart , there is a deviation in prices and then hammer candle is formed. The distance between candle and 9 EMA is also bigger to give risk reward of 1. Check the candle low is also low of last 2-3 days

Intraday trading strategies Figure 3 — **Figure 3:** In this BANK NIFTY chart there is a doji candle formation along with deviation in prices . The candle is also the high of last 2-3 days but stop loss is hit on this day as next candle closes above the high of entry candle.

Exit rule

Step 1 : Take first profit at risk reward of 1. This means around 100 spot points movement in BANK NIFTY and 50 spot points movement in NIFTY

Step 2 : Take second profit at risk reward of 2 or you can trail the profit.

Note : Trailing stop loss require expertise in market

Stop Loss

Stop loss can be kept at entry candle high in case you have buy a PUT OPTION and entry candle low in case of you have buy a CALL OPTION.

Stocksgully tip

Based on volatility in the market , BANKNIFTY SL can be kept at 100 points on spot price and NIFTY SL can be kept at 50 points on spot price. Sometimes the entry candle range will be like 30-40 points ( In case of BANKNIFTY ) and if you put SL at high of the candle , volatility might hit your SL even if setup is correct and later it gives a good profit.

Important points to consider basis this setup

Once setup is formed , check whether it is also the high of last 3 – 4 days in case deviation happens above 9 EMA and low of last 3-4 days in case deviation happens below 9 EMA . The probability of trade increases in these cases.
Buy ATM call in this setup.

Backtesting

Always backtest the strategy before taking actual trades in market . The strategy should suit your trading style and psychology.

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