For years, market players have been fooled by signs that guarantee vast profits but never materialize. I’ve tried many indicators with much promise but disappointing performance upon live trading. I felt betrayed by developers giving enormous promises for gains, then watching my stop losses get activated time and again.
Finding the Right Indicator
After hours of frustration, I came across an indicator that was different. It was doing something right: correctly marking the beginning and end of trends. But there was a catch—it worked great in trending markets, but not as much in sideways, consolidating markets. I needed to figure out how to modify it and make it better.
How to Use the EMA Trend Meter and Stochastic Momentum Index
I discovered that I could increase the accuracy of the EMA Trend Meter by tweaking its settings. Here’s how to configure it:
Obtain TradingView
You need a TradingView account first. I’ll be leaving a link in the description for you to register.
Install the EMA Trend Meter Indicator
After you’re on your chart, find the “EMA Trend Meter” in the search bar for indicators and add it.
Adjust the Settings
Click on the settings icon beside the indicator. Adjust the following:
- EMA Baseline to 13
- EMA Fast to 21
- EMA Medium to 34
- EMA Slow to 55
Style Adjustments
Move to the “Styles” tab and deselect the box for shapes.
With these settings, the indicator is less sensitive and more concerned with finding actual trends.
Solving the Consolidation Problem
While the adjusted EMA Trend Meter works great in trending markets, it still doesn’t do well in consolidating markets. That’s when I found the Stochastic Momentum Index. Adding this to the chart serves to filter out trades during consolidation so you only trade when there is substantial movement in the market.
Add the Stochastic Momentum Index
Find “Stochastic Momentum Index” on TradingView and add it to your chart.
Adjust the Settings
Change the color of the stochastic line to white and raise the opacity.
Now, with two indicators on your chart—EMA Trend Meter and Stochastic Momentum Index—you’re ready to start trading more effectively.
The Strategy: Entering and Exiting Trades
To use these indicators effectively, follow these steps:
Identify a Trend
The EMA Trend Meter must show all three lines green for a long trade (or red for a short trade).
Verify with the Stochastic Momentum Index
For a long position trade, the white line must be lower than the blue line, then cross above the red line. For a short position trade, the white line must be higher than the blue line, then cross below the red line.
Verify for Volatility
Make sure there is enough movement in the market by verifying that the Stochastic line crosses the red line in the direction of your trade.
Enter the Trade
After both indicators converge, you can enter into a trade with confidence.
Fine-Tuning the Strategy
To further enhance your win ratio, I recommend combining the strategy with higher-level concepts such as fair value gaps, order blocks, and liquidity. If you don’t know what these are, go through my other videos. For a basic method, you can simply employ a 2:1 risk-to-reward ratio and place your stop loss below the latest low for long positions or above the latest high for short positions.
Maximizing Your Accuracy with the Trend Table
To really take this strategy to the next level, I suggest utilizing a Trend Table indicator found on MT5. The Trend Table indicates to you key statistics like trend, momentum, volatility, and volume. More importantly, it can inform you whether the market is trending or consolidating, which can prevent the dreaded false signals during sideways markets.
Add the Trend Table to MT5
Connect your TradingView account to MT5, then make sure the EMA Trend Meter is properly configured in TradingView.
Confirm Metrics
Check all metrics to be green, particularly the “Consolidation” metric. If it indicates “Trending,” you can go ahead with the trade.
Example: The Perfect Trade Setup
Long Trade
- Have all three lines on the EMA Trend Meter green.
- Ensure the white line on the Stochastic Momentum Index is below the blue line and crosses above the red line.
- Enter the trade, place a stop loss below the recent low, and take profit at a 2:1 ratio.
Short Trade
- Ensure all three lines on the EMA Trend Meter are red.
- Confirm the white line is above the blue line and crosses below the red line.
- Enter the trade, set a stop loss above the recent high, and set a take profit at a 2:1 ratio.
Conclusion: The Only Indicator You’ll Ever Need
With the EMA Trend Meter, Stochastic Momentum Index, and MT5’s Trend Table, you have everything you need to spot high-probability trades and sidestep those destined to fail. This strategy is effective on multiple timeframes, with the 1-hour, 4-hour, and daily charts being highly effective.
By tuning your indicators, setting adjustments, and eliminating consolidating markets, you can have a dramatic win rate increase. Try this approach out and share how it goes for you!