If you’re someone who likes clean, simple trading strategies that actually work — the 5 EMA strategy might just be your next go-to setup. It’s beginner-friendly, works in all market types (stocks, futures, options, indices), and gives you crystal-clear entries and exits.
Let’s break it down step by step — no fluff, no confusion.
Pro Tip: Look at the image attached to this blog post. It visually explains the alert candle, entry candle, and stop loss placement.
What is the 5 EMA?
EMA stands for Exponential Moving Average. The 5 EMA is a short-term moving average that gives more weight to the most recent 5 candles. It reacts quickly to price changes, making it ideal for scalping and intraday trading.
How to Set Up the 5 EMA
Here’s how to set up this strategy on your chart:
- Open your chart (any platform like TradingView, ThinkorSwim, etc.)
- Set the chart to Japanese Candlesticks
- Add the indicator Exponential Moving Average
- Set the length to 5
Boom. That line on the chart is your 5 EMA — now let’s get into how to use it.
Sell Setup (5-Minute Timeframe)
This is for traders who like fast-paced, short-term action. Use the 5-minute chart for this.
Step 1: Look for the Alert Candle
You’re looking for a candle where the low does not touch the 5 EMA — meaning the entire candle is above the EMA line.
This is called the alert candle.
It signals that the price has stretched too far from the average and might soon pull back.
! Don’t enter a trade just yet.
Step 2: Wait for Entry
After the alert candle, wait for any future candle (even if it’s 2–3 candles later) to break the previous candle’s low.
When that happens → You enter a sell trade.
- Candle color doesn’t matter — red or green is irrelevant.
- What matters is that the structure follows the 5 EMA rule.
Step 3: Place Stop Loss
You’ve got two choices for stop loss
- The high of the entry candle
- Or the recent swing high
Pick whichever is higher (safer).
Step 4: Target
Use a 1:3 Risk-Reward Ratio.
For example, if your stop is 10 points, aim for 30 points. You can also trail your stop once the price moves in your favor.
Buy Setup (15-Minute Timeframe ONLY)
This is where most traders mess up — the buy setup works only on the 15-minute chart, and here’s how it’s different.
Step 1: Look for the Alert Candle
You’re looking for a candle where the high does not touch the 5 EMA — the whole candle should be below the EMA line.
This is your alert candle for a potential buy setup.
It shows that price has pulled away from the average and may bounce up soon.
Pro Tip: Only check for this on the 15-minute timeframe — not on 5-min
Step 2: Entry Rule
Wait for the next candle (or any after the alert) to break the high of the previous candle.
That’s your buy entry.
Again, candle color doesn’t matter at all.
Step 3: Place Stop Loss
Use either:
- The low of the entry candle, or
- The most recent swing low
Pick the one that gives the setup enough room.
Step 4: Target
Stick with a 1:3 risk-to-reward ratio. You can book partial profit at 1:2 and trail the rest.
Bonus Tips for High-Probability Setups
Want to increase your success rate? Use these extra filters:
1. Look for Gaps (Gap Up or Gap Down)
If you’re trading US stocks:
- Find stocks with a 2%+ gap up or gap down at the open.
- Let the market stabilize for 10–15 minutes.
- Apply the 5 EMA strategy.
These stocks often show strong moves, and this strategy works like a charm.
2. Combine With Support or Resistance Breaks
- If a support level breaks, use the 5-min sell setup.
- If a resistance level breaks, use the 15-min buy setup.
This adds an extra edge by confirming momentum with price action.
Final Thoughts
The 5 EMA strategy gives you a simple framework for entering high-probability trades. No need for 5 indicators, no guessing — just let price and structure guide your decisions.
✅ Works on stocks, options, futures, and indices
✅ Only 1 indicator needed
✅ Clear entries, exits, and risk management
Whether you’re trading full-time or part-time, this setup can help you stay consistent — and consistency is what wins in the market.
Reminder: Check the example chart image attached above to see the alert candle and entry setup clearly.
5 EMA Trading Strategy – Quick Reference Table
| Setup Type | Timeframe | Alert Candle Condition | Entry Rule | Stop Loss | Target | Candle Color Matters? |
| Sell Setup | 5-Minute | Candle low must not touch 5 EMA | Enter when a candle breaks previous candle’s low | High of entry candle or swing high | Minimum 1:3 RR | No |
| Buy Setup | 15-Minute | Candle high must not touch 5 EMA | Enter when a candle breaks previous candle’s high | Low of entry candle or swing low | Minimum 1:3 RR | No |