The 15-min chart is excellent when you want to catch a multi-day swing-trade and gain some significant profits. It is my favorite chart to find entries after consulting the daily chart. And the 20 exponential moving average plays a considerable role in finding that entry.

The 20 EMA is the best moving average for 15 min charts because price follows it most accurately during multi-day trends. The price that is above the 20 can be considered as bullish and below as bearish for the current trend. Let’s have a closer look at how you can use this moving average with your swing-trades.

How to identity a trend with the 20 EMA

Before I show you how you can use the 20 EMA on the 15 min chart, it is essential to know how you can identify a trend on a higher timeframe like the daily chart. If you know the direction of the stock on the daily chart, it makes finding an entry on the 15 min chart a lot easier.

People usually show trends as they kept going for a long time already, but I always asked myself how I could recognize a trend early on? I don’t want to throw my money in when the trend is already extremely overextended and screams for a more significant pullback. So after digging a bit deeper and watching thousands of charts, I came up with this simple rule to confirm to myself that there is a clear trend going on in that particular stock.

Setting up rules to identify a trend

Let’s take a look at how I recognize trends early. I set up some rules to identify a trend so that I know in which direction a stock is likely going to move. You can use these rules for up- and down-trends, and they also work on different timeframes that you want to trade. So my rules are as follows:

  • The price has been moving up several days with at least one higher low (or lower high if you want to trade a downtrend).
  • Price has a 20 EMA that is pointing upwards, at a two o’clock angle and steeper (or a 4 o’clock angle when you are going for a downtrend).
  • Price has broken resistance (or support zones in a downtrend) with substantial-high volume.
20 EMA is pointin downwards, which indicates a down-trend.
After a higher low the stock moves up heavily with large volume.
20 EMA is pointing upwards, which indicates an up-trend.

As you can see the 20 EMA is now pointing upwards and the stock is building even a second higher low. I can say that this stock is on an uptrend, and I can look for setups to create my plan and find my entry.

When we look at the price continuation of this stock, we can see that the uptrend continued significantly.

The up-trend has been established and I can look for setups.

How to find entries with the 20 EMA

I want to make an example of how you can use the 20 EMA on the 15min to find an entry. But since we need to check the trend on the higher timeframe, I check the daily chart first. So lets have a look at the daily chart of ROKU (ROKU Inc.)

Previous trend was up but the price broke through a support and the 20 EMA. The price went back up over the 20 EMA after a few days which indicates that the uptrend is still strong.

As you can see, the trend on the daily was upwards. Even though it tried to break through support and the 20 EMA, it went back up after a few days, which indicates that the trend is still strong. So I am very much biased to the upside which is why I go to the 15-min chart now trying to find an entry.

The aggressive entry. The 20 EMA acts as support. As soon as the price busts through the resistance you saw on the daily chart you can take a position to the long side.
The safer entry as the price went through resistance with a lot of volume. The 20 EMA acts again as support. When you see it holding you can take a position to the long side.

There were two possible spots where you could buy the stock. The first spot would be the breakout over the resistance zone shown on the daily chart. You can see that the price follows the 20 EMA which lines up as an ideal buy point.

The second spot is a more safe one as the stock has confirmed its strength with the high-volume move over the resistance zone. So I try to find an entry spot on the 15 min chart as soon as price hits and holds the 20 EMA.

As you can see, the price moved higher significantly and made a nice profit.

Can I use the 20 EMA for day-trading?

Yes, you can, but I usually need a particular pattern before I would day-trade based on the 15-min chart. And even if I get that pattern, I still confirm it by support or resistance zones.

The pattern itself is relatively simple. You either get a strong down- or up-move in the morning with a retrace to the 20 EMA within the first 2 hours after market open. If I see that price struggles to push through the 20 EMA, I take a position either to the short or the long side. For this strategy to work out, you also need to check the trend on the higher timeframe. If the trend is in the direction of the morning move, you have a high probability that the price will reverse at the 20 EMA.

The price retraces to the 20 EMA in the first 2 hours after the market open. The 20 EMA acts as resistance which makes it perfect for a short entry.

When does it not work?

As always in trading, nothing works 100%. So there are also spots where the 20 EMA is pointless, and that is mainly the case when the price reaches a support or resistance zone and goes sideways. You will often see the price chopping around and ignoring the 20 EMA completely. If you see something like this, I would highly advise staying away from it as the chances are high that you will lose money trading this chop.

I also suggest that you do not only trade based on moving averages. Learn the strategies we do and combine them with moving averages for maximal success.

Conclusion

The 20 EMA is a powerful tool on the 15 min chart that can yield substantial swing-trading profits. You should always confirm your trades with the trend of the daily chart and also consider existing support and resistance zones.

If you want to become a better trader, consider checking out our free trading guide.

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