How to make «EMA (5) + EMA (12) + RSI (21)» strategy work and bring profits

A couple of words about the parameters and trading signals

This EA was created with the help of our Easy Forex Builder. The backtesting was performed with the help of Forex Tester.

Currency pair: EUR/USD.

Timeframe: H1.

Initial deposit: $100000, leverage: 1:100, the min volume of the trade: 1 lot.

The “Bars to skip” parameter defines the search range of a trading signal (in bars). All trades are opened and closed automatically.

Testing period is from 01/01/2017 to 12/31/2018.

Indicators: EMA (5; close), EMA (12; close), RSI (21; close) with level 50.

Trading signals of the strategy: Buy:

• EMA (5) crosses EMA (12) from bottom to top;
• RSI line is above level 50.

Sell:

• EMA (5) crosses EMA (12) from top to bottom;
• RSI line is below level 50.

Entrance at the next bar after the breakdown; the trade closes at the opposite intersection of the RSI line or due to Stop Loss.

Risk: no more than 1% deposit per transaction.

Results of the Test 1

Each trade is closed only when a reverse signal appears according to the rules of the strategy. Take Profit, Stop Loss, trailing stop and manual trading are not used.

Bars to skip parameter: 100.
Statistics
Profit analysisAccording to the test results, more than 50% of the deposit was lost, the profit factor is below 1, profitable transactions are 2.5 times less than unprofitable ones, although the average profit per transaction is higher than the average loss.

All statistics results can be named as negative.

Risk analysisOnly one trade with a volume of 1 lot was opened at a time, dangerous methods of money management were not used. The deposit was in the drawdown most of the trading time, the maximum drawdown was almost 90%.

The main reason for the negative result was the trading technique. Even if the entry was made correctly, then in order to close the deal, the market had to turn quite strongly against the open position so that the indicators could recalculate the data and generate a return signal.

Trailing Stop and Take Profit were not used, as a result, profitable positions were closed too early on false feedback signals. As a result, a profit shortfall is observed in almost every profitable transaction, and sometimes, in anticipation of a return signal, the transaction could generally lose.

Results of the Test 2

Each transaction opens with a fixed Take Profit of 75 points, Stop Loss of 25 points. It closes only by stop orders. Trailing and manual trading are not used.

If there is a signal, several trades with the same parameters can be opened, but no more than 5. Strategy parameters in the Forex Tester system are similar.

Statistics
Profit analysisProfit amounted to almost 100% of the initial deposit. The number of profitable trades is also 3 times less than unprofitable ones, but the average profit is 3 times higher than the loss (as laid down in the Take Profit / Stop Loss conditions).

The profit factor is slightly lower than the recommended one, there is almost no margin for recovery. In general, statistics can be estimated as average.

Risk analysisThe load on the deposit did not exceed 30%, that is, no more than 3 transactions of 1 lot were opened at the same time, dangerous methods of money management were not used. Most of the test time, the trading account was in confident profit, the maximum drawdown in the short-term was more than 50%.