How To Use The EMA Ribbon — AAX Academy
In this article, we will be looking at how to use and build the EMA ribbon indicator on AAX.
If you are unfamiliar with the EMA indicator you can have a read of our previous article explaining the indicator. A crucial part of this EMA ribbon indicator is understanding EMA crossovers.
We recommend that you read through these articles before reading the rest of this post.
The EMA ribbon indicator
The EMA ribbon indicator works through using a variety of EMAs using various amounts of data for each individual indicator in order to create a ribbon effect. Apart from looking pretty, the indicator can provide buy and sell signals as well as provide support and resistance. Below, we can see an example of the EMA ribbon indicator on TradingView.
The makeup of the indicator
The indicator consists of two main sections. The first section is the long term EMA. Below we can see the 200 EMA section of the indicator.
The purpose of the 200 day EMA is firstly to provide support and resistance for the cryptocurrency. In the example below we can see the 200 day EMA provides both support and resistance for BTC as indicated with the white arrows.
The second section of the EMA ribbon indicator is the ribbon itself. The ribbon shows the EMA lines from multiple EMAs on the selected timeframe. When using the ribbon we look for crossovers.
Below we can see an example of bearish and bullish crossovers. The bearish crossover occurs when the longer timeframe EMAs move above the shorter time frame EMAs. We can see this indicated on the timeframe below with the red thumb, with the ribbons turning red. When this occurs it is a bearish signal.
On the contrary, bullish signals occur when the shorter timeframe EMAs cross above the longer time frames EMA. In the example, below this is shown with the green ribbon / green thumb.
How to build the EMA ribbon indicator on AAX
To do what is described below, follow these instructions:
- 1 — Select Moving Average Exponential indicator
- 2 — Double click on the indicator line
- 3 — Change the length to the numerical data period provided
- 4 — Click ok
- 5 — Repeat steps until all MAEs are displayed
To build the indicator you will require the following EMA settings
IndicatorData periodSupport/resistance providedMoving Average Exponential15lowMoving Average Exponential20lowMoving Average Exponential25lowMoving Average Exponential30lowMoving Average Exponential35lowMoving Average Exponential40mediumMoving Average Exponential45mediumMoving Average Exponential50mediumMoving Average Exponential100mediumMoving Average Exponential200highMoving Average Exponential500highMoving Average Exponential1000highMoving Average Exponential2500high
Your indicator should now be complete and look something similar to what is shown below.
BTC/USDT indicator example
Indicator conclusion
The EMA ribbon indicator is highly effective at providing buy and sell signals in volatile markets, alongside providing support and resistance. However, during periods of sideways trading the indicator is ineffective and provides inaccurate signals.
On the whole the indicator is easy to follow and can be an effective part of an overall strategy.Originally published at https://academy.aaxpro.com on March 4, 2021.
