5 EMA Game Changer Strategy? The Shocking Truth Revealed
Here you can find the backtested results of popular 5EMA trading strategy on bank nifty. Find out if it is profitable or not before actually trading
Is the 5 EMA Game Changer Strategy Really a Game Changer?
In the world of trading, everyone's looking for that edge, that strategy that gives them consistent returns.
Today, we’re diving into a strategy called the "5 EMA strategy", very popular one on the internet.
But does it actually live up to the hype? Let’s find out.
Before reading, if you like watching video, here it is:
The Strategy: 5 EMA for Scalping
The strategy focuses on shorting opportunities using the 5-day Exponential Moving Average (EMA).
It's designed for the Bank Nifty index on 5 min time frame.
Strategy Rules (Short Selling)
Set a 5 minutes timeframe on the Bank Nifty chart.
- Add the 5-day EMA.
- Identify a Candle that DOES NOT touch the 5 EMA line but above the line. This is our Alert Candle.
- Enter a Short trade when the candle after alert candle breaks alert candle's low.
- Place your stop loss (SL) at the high of the Alert Candle.
Strategy considerations
- Set your target at 3 times your stop loss range.
- You can enter a maximum of 3 short selling trades per day.
- Exit when the target is hit.
- Exit when the SL is hit.
- At 3:15 PM, exit if neither has been hit by then.
Example Trade
Backtest Results (Without Charges)
To test this trading strategy, first the historical data was downloaded from Zerodha for Bank Nifty.
From Jan 01, 2015, till Apr 28, 2023, the data was used to run the Python Script.
Inputs considered
Total Returns (No compounding): 296%
Average Yearly Return (No Compounding): 33%
Win Rate: 51%
Backtest Results (With Charges)
But can we neglect all the charges??
Once again, from Jan 01, 2015, till Apr 28, 2023, the data was used to run the Python Script and all charges were added except brokerage and slippage.
The result is
Total Returns (No compounding): -59%
Average Yearly Return (No Compounding): -7%
Win Rate: 45%
Summary: To Trade or Not to Trade
The main take from running Backtest with the 5EMA game change strategy is that:
I will NOT trade this as it is not profitable on index. So, it will not be on futures. I may do Backtest with options for the same before discarding completely.
If you found this helpful, let me know in comments.
