Sell Signal Strategy: EMA-Based Sequential Break
This strategy identifies high-probability sell signals based on the behavior of candles in relation to a short-term exponential moving average (5 EMA). The following steps outline the specific conditions under which a sell signal is triggered:
Alert Candle Identification:
A candle qualifies as an alert candle if it:
Closes with its high and low fully above the 5 EMA.
Does not touch or cross the 5 EMA at any point.
Each new candle meeting these criteria will update the alert candle, storing the high and low values of the latest qualifying candle.
Sell Trigger Condition:
Once an alert candle has been identified, the strategy waits for a sell trigger.
A sell signal is generated if:
A subsequent candle's low breaks below the low of the latest alert candle.
This downward break indicates potential downward momentum, and a sell signal is plotted.
Signal Logic:
The sell signal is only generated once per alert candle sequence, ensuring no repeat signals are produced until a new alert candle is formed.
Use Case and Application
This strategy is designed for traders looking for short-term entry points in a downtrend, particularly in timeframes where the 5 EMA acts as a dynamic resistance level. The signal is triggered when price momentum weakens relative to the EMA, providing an opportunity to enter a potential downtrend following a price rejection.
Note: This strategy is particularly useful in trending markets where price respects short-term EMAs as support or resistance.