Riding the 5ema

I like to use the 5ema on the daily chart to determine my bias at the beginning of my trading day.  Since lately I have been using the GBPJPY for my intraday trading, I have included my daily chart with the 5ema in red.  It is a fair assumption that if the daily candle closes above the 5ema, it is likely to continue moving up for the next day.  Conversely, a close of the daily candle below the 5ema would signal the likelihood that the next day’s price action would also move down.  This very simple method of determining direction is not 100%, but in my experience it does work about 80% of the time.  Last week was a spectacular week on this pair for intraday trading.  The white arrow shows Monday’s price action, crossing from bottom to top over the 5ema.  My bias on this pair was DOWN on Monday, since Friday’s close was below the 5ema.  So on Monday morning I looked for a good entry for a short and entered, but quickly price ran against me and I closed my trade for -52 pips.  But with Monday’s candle closing above the 5ema, my bias then turned to upside.  In fact all of my trades on this pair remained with a buy bias, and I made about +100 pips on each trade, 4 days in a row.  Not too shabby.   The key to this method of finding trade direction bias is to just look at the daily close in relation to the 5ema.  Do not let the wicking price action during the day trick you into a contrary trade.  This happened several times last week where price fell back down, reaching below the daily 5ema but only to actually end the day back above the 5ema level, signaling a continuation in the upside bias.  Taking profit on this type of trading is up to you.  For me, a cool 50-100 pips per trade is perfectly good.  I like to look for entries at the hourly 20sma or the bottom bollinger band if I am upward biased.  This way my stop loss can be placed just 40 pips below that, a good risk/reward trade.  Good trading!