EDMA Scalping Strategy (Exponentially Deviating Moving Average)

This trading strategy is based on the Exponentially Deviating Moving Average (EDMA) and Exponential Moving Averages (EMA) with a Chikou span filter to signal trade entries. It triggers buy signals when a strong uptrend is confirmed by EDMA and EMA crossover, as well as Chikou span conditions, and sell signals for the opposite scenario.

To trade this strategy manually on TradingView, use the following steps:

• Determine your source based on the options given in the script and apply a Symmetrically Weighted Moving Average (SWMA) if required.
• Calculate the EDMA with a specified length by first determining the Exponentially Expanding and Contracting moving lines and then applying the Hull Moving Average (HMA) to these values.
• Find the EMA values for the lengths provided in the script.
• Check the indicated Chikou span period to determine the dynamic color for the EDMA, which suggests the market trend response.
• Identify the crossover points of the EMAs and EDMA plots as entry signals—buy when EMA1 and EMA2 are above EDMA (for a strong signal, confirm with the Chikou span filter), sell when EMA1 and EMA2 are below EDMA, again with optional Chikou confirmation.
• Enter a long position when a strong buy signal is identified and close it when a strong sell signal appears. Enter a short position on a strong sell signal and close it on a strong buy signal.

Improving the EDMA Scalping Strategy for manual trading involves optimizing various components of the method for increased accuracy and reduced risk. The EDMA strategy utilizes the unique characteristics of the Exponentially Deviating Moving Average in conjunction with classic Exponential Moving Averages and a Chikou span filter to pinpoint optimal entry and exit points.

To optimally implement and enhance this strategy manually, consider the following steps:

• Refine Period Lengths: While the default period length is set at 20 for both EDMA and EMA, it may be adjusted after analyzing the asset's historical performance in various market conditions. This tuning should aim to reduce lag and improve responsiveness without adding excess noise to signals.
• Adapt to Volatility: Incorporate a volatility filter, such as the Average True Range (ATR), to adjust the strategy's sensitivity according to the market's volatility. By doing so, you prevent the strategy from generating false signals during erratic market movements.
• Manual Confirmation: Use additional technical analysis tools like candlestick patterns or support and resistance levels to confirm entry signals provided by the EDMA crossover. This extra step allows for an additional layer of validation, reducing the likelihood of false breakouts.
• Chikou Span Analysis: While the Chikou span provides a useful trend confirmation, manually checking its position in relation to the price action—specifically whether it is above or below the price—can offer a more nuanced understanding of the market sentiment.
• Timeframe Considerations: Test the strategy across multiple timeframes to determine the most suitable one for your trading style. Higher timeframes may provide more reliable signals, whereas lower timeframes can increase trade frequency but might also carry more false signals.
• Custom Risk Management: Tailor risk management parameters to fit your risk tolerance. This involves setting appropriate stop-loss orders based on key levels or a certain percentage of ATR away from the entry point and using variable position sizes depending on the strength of the signal and current market conditions.
• Backtesting and Forward Testing: Rigorously backtest the manually adjusted strategy against historical data, followed by forward testing in live market scenarios using a demo account. Record and analyze each trade to identify patterns and potential areas of improvement.

The Exponentially Deviating Moving Average Scalping Strategy is particularly tailored for traders who prefer a technical and systematic approach to scalping in the markets. It is well-suited for those who operate on higher timeframes, such as 12-hour charts, looking for precision in entry and exit points without getting caught in the market noise prevalent in lower timeframes.

This strategy is designed for traders with a risk-averse attitude who favor lower drawdowns and the use of filters like the Chikou span to minimize false signals. It's also beneficial for traders willing to engage in backtesting to optimize settings according to their specific risk profile and capital allocation preferences. Finally, it demands a certain level of dedication to manual adjustments and monitoring, making it optimal for hands-on traders.

• Strategy Essence: Utilizes crossover of Exponentially Deviating Moving Average with an Exponential Moving Average for precise entries and exits.
• Target Audience: Ideal for technical traders who appreciate detailed analysis, higher timeframe usage, and manual refinements.
• Manual Trading Adaptations: Adjust period lengths, apply volatility filters, and incorporate extra layers of technical analysis for validation.
• Automated Alerts: Set up alerts based on crossover events and Chikou span conditions to assist in timing the market without constant monitoring.
• Risk Management: Employ stop-loss orders, customize position sizes, and use Chikou span for trend confirmation to align with individual risk tolerance.
• Backtesting Necessity: Vital to conduct thorough backtesting and forward testing, refining strategy parameters for optimized performance.
• Operational Approach: Suitable for hands-on traders who actively manage trades and adjust strategies based on market conditions.