Overview

This guide aims to provide Global Prop. Traders (GPT) with a structured approach to trading based on identifying various phases of the financial asset market cycle using color-coded EMA Zones, EMA crossovers, and MACD settings. The trading timeframe is set to the Daily chart.

EMA Zones: Color-Coded and Detailed

The EMA Zones help in identifying the market’s current phase and potential future movements. Each zone is color-coded and represents a specific aspect of the market trend.

1. Momentum Zone (Lime Green EMAs: EMA 1 to EMA 8)
   • Description: This zone captures the immediate market momentum. Short-term EMAs indicate rapid price changes and are highly sensitive to market fluctuations.
   • Use: Ideal for identifying quick, short-term moves and potential entry or exit points during strong trends.
2. Acceleration Zone (Medium Sea Green EMAs: EMA 9 to EMA 15)
   • Description: This zone represents the market’s acceleration phase. It provides insights into the continuation or strength of a recent price move.
   • Use: Useful for confirming the strength and persistence of a trend beyond the immediate momentum.
3. Transition Zone (Pale Green EMAs: EMA 16 to EMA 25)
   • Description: The transition zone indicates the market’s shift from one trend to another. It is a critical area for identifying trend reversals or the beginning of new trends.
   • Use: Key for spotting the initial signs of a new trend and for making early entries or exits.
4. Value Zone (Light Gray EMAs: EMA 26 to EMA 50)
   • Description: This zone reflects the average market value over a moderate period. It often acts as a support or resistance level and helps in identifying fair value areas.
   • Use: Important for gauging the market’s medium-term direction and for making informed trading decisions based on value.
5. Correction Zone (Light Coral EMAs: EMA 51 to EMA 89)
   • Description: The correction zone captures price corrections within longer-term trends. It highlights pullbacks or retracements within a prevailing trend.
   • Use: Useful for identifying potential buying or selling opportunities during corrections in an ongoing trend.
6. Trend Reassessment Zone (Salmon EMAs: EMA 90 to EMA 140)
   • Description: This zone is used to reassess the strength and direction of long-term trends. It indicates significant trend changes or consolidations.
   • Use: Key for evaluating the sustainability of long-term trends and making adjustments to long-term positions.
7. Long-term Trend Zone (Brick Red EMAs: EMA 141 to EMA 200)
   • Description: This zone represents the market’s long-term trend direction. It provides a broad view of the market’s overall trend over an extended period.
   • Use: Essential for long-term investors and for confirming the primary trend direction.

MACD Settings

The MACD settings are:

• Fast Length: 15
• Slow Length: 25
• Signal Length: 8

Market Phases and Trading Triggers

1. Accumulation Phase

Characteristics:

• Occurs after the market has bottomed out.
• Prices stabilize and begin to rise gradually.
• Institutional investors start buying.

Indicators:

• EMA Zones: Price moves above EMA 25 (Transition Zone).
• EMA Crossover: EMA 16 crosses above EMA 25.
• MACD: MACD Line crosses above the Signal Line, and the histogram turns positive.

Action:

• Buy Signal: Enter long positions when EMA 16 crosses above EMA 25, confirmed by a bullish MACD crossover.

2. Markup Phase

Characteristics:

• Strong upward movement in prices.
• Increased buying interest and rising trading volumes.

Indicators:

• EMA Zones: Price moves above EMA 15 (Acceleration Zone).
• EMA Crossover: EMA 1 crosses above EMA 8.
• MACD: MACD Line well above the Signal Line, and the histogram is consistently positive.

Action:

• Hold/Buy Signal: Hold existing long positions or add to them when EMA 1 crosses above EMA 8, supported by a strong positive MACD.

3. Distribution Phase

Characteristics:

• Market reaches a peak and may start to consolidate.
• Early signs of selling pressure from institutional investors.

Indicators:

• EMA Zones: Price moves sideways around EMA 9 to EMA 15.
• EMA Crossover: EMA 1 crosses below EMA 8.
• MACD: MACD Line starts to converge with the Signal Line, and the histogram decreases.

Action:

• Sell Signal: Consider taking profits or reducing long positions when EMA 1 crosses below EMA 8, confirmed by a weakening MACD histogram.

4. Decline Phase

Characteristics:

• Prices fall as selling pressure increases.
• Pessimism prevails among investors.

Indicators:

• EMA Zones: Price moves below EMA 51 (Correction Zone).
• EMA Crossover: EMA 51 crosses below EMA 89.
• MACD: MACD Line crosses below the Signal Line, and the histogram turns negative.

Action:

• Sell/Short Signal: Enter short positions or close remaining long positions when EMA 51 crosses below EMA 89, confirmed by a bearish MACD crossover.

Practical Example

1. Accumulation Phase:
   • Price: Moves above EMA 25 (Transition Zone).
   • EMA Crossover: EMA 16 crosses above EMA 25.
   • MACD: MACD Line crosses above the Signal Line, histogram turns positive.
   • Action: Buy Signal.
2. Markup Phase:
   • Price: Moves above EMA 15 (Acceleration Zone).
   • EMA Crossover: EMA 1 crosses above EMA 8.
   • MACD: MACD Line remains above the Signal Line, histogram is positive.
   • Action: Hold/Buy Signal.
3. Distribution Phase:
   • Price: Moves sideways around EMA 9 to EMA 15.
   • EMA Crossover: EMA 1 crosses below EMA 8.
   • MACD: MACD Line converges with Signal Line, histogram decreases.
   • Action: Sell Signal.
4. Decline Phase:
   • Price: Moves below EMA 51 (Correction Zone).
   • EMA Crossover: EMA 51 crosses below EMA 89.
   • MACD: MACD Line crosses below Signal Line, histogram turns negative.
   • Action: Sell/Short Signal.

Conclusion

By following this guide, Global Prop. Traders (GPT) can systematically identify the different phases of the financial asset market cycle and make informed trading decisions. The combination of EMA Zones, EMA crossovers, and MACD settings provides a robust framework for analyzing market trends and executing trades with confidence.

About the Author: Dr. Glen Brown

Dr. Glen Brown stands at the forefront of the financial and accounting sectors, distinguished by a career spanning over a quarter-century marked by visionary leadership and groundbreaking achievements. As the esteemed President & CEO of both Global Accountancy Institute, Inc., and Global Financial Engineering, Inc., he steers these institutions with a steadfast commitment to integrating the realms of accountancy, finance, investments, trading, and technology. This integrative approach has solidified their status as pioneering entities in global multi-asset class professional proprietary trading and education.

Holding a Doctor of Philosophy (Ph.D.) in Investments and Finance, Dr. Brown possesses profound expertise that covers an impressive spectrum of financial disciplines. His knowledge extends from financial accounting and management accounting to intricate areas of finance, investments, strategic management, and risk management. His role transcends traditional leadership; as the Chief Financial Engineer, Head of Trading & Investments, Chief Data Scientist, and Senior Lecturer, Dr. Brown embodies the spirit of hands-on innovation and scholarly excellence.

Dr. Brown’s guiding philosophy, “We must consume ourselves in order to transform ourselves for our rebirth,” encapsulates his holistic approach to professional and personal development. It underscores a belief in the transformative power of self-reflection, creative imagination, and the relentless pursuit of spiritual and intellectual growth. This ethos is the bedrock of his dedication to not just navigating but shaping the future of finance and investments with innovative solutions.

Beyond his executive and academic roles, Dr. Brown is a fervent advocate for continuous learning and innovation. His leadership has catalyzed a culture of forward-thinking at Global Accountancy Institute, Inc., and Global Financial Engineering, Inc., propelling them into the vanguard of financial education and proprietary trading. Under his guidance, these institutions not only adapt to the evolving financial landscape but actively contribute to its development, offering state-of-the-art solutions to the industry’s most complex challenges.

Dr. Brown’s commitment to excellence is matched by his dedication to nurturing the next generation of financial professionals. Through his visionary outlook and unique philosophical approach, he inspires a cadre of students and professionals alike to transcend conventional boundaries, fostering an environment where innovation, leadership, and success flourish.

In essence, Dr. Glen Brown is not just a leader but a pioneer, educator, and innovator whose life’s work continues to impact the global finance and accounting industries profoundly. His legacy is defined by the relentless pursuit of excellence, the transformation of challenges into opportunities, and the unwavering belief in the potential for rebirth and regeneration in the professional realm.

General Disclaimer

The information provided in this trading guide is for educational and informational purposes only. It should not be considered financial or investment advice. Trading financial assets involves significant risk and may not be suitable for all investors. Past performance is not indicative of future results. Always conduct your own research and consult with a licensed financial advisor before making any trading decisions.