2 EMA + Stoch RSI + ATR Strategy

The 2 EMA + Stoch RSI + ATR Strategy indicator is a comprehensive trend-following tool that combines moving averages, momentum oscillators, and volatility-based risk management to identify high-probability entry and exit points.

Usage

The strategy is designed to capture pullbacks within an established trend. It utilizes a dual-filter system to ensure trades are taken in the direction of the long-term momentum while entering at optimal exhaustion points.

Long Entry Conditions:

• Trend Filter: The 50 EMA must be above the 200 EMA.
• Pullback: Price closes below the 50 EMA.
• Momentum: The Stochastic RSI must enter the oversold region (below 20).
• Confirmation: A bullish crossover occurs on the Stochastic RSI, forming a higher low compared to the previous crossover.

Short Entry Conditions:

• Trend Filter: The 50 EMA must be below the 200 EMA.
• Pullback: Price closes above the 50 EMA.
• Momentum: The Stochastic RSI must enter the overbought region (above 80).
• Confirmation: A bearish crossover occurs on the Stochastic RSI, forming a lower high compared to the previous crossover.

Exit Strategy: The script automatically calculates an ATR-based stop-loss and a fixed Reward-to-Risk (RR) take-profit level. It also includes an optional breakeven feature that moves the stop-loss to the entry price once a specific RR target is reached.

Details

This strategy implements a trend-confirmation logic using two Exponential Moving Averages (EMAs). The 200 EMA acts as the primary trend baseline, while the 50 EMA serves as a dynamic support/resistance level for pullbacks. The Stochastic RSI provides the timing mechanism, specifically looking for "Higher Lows" in oversold territory for longs and "Lower Highs" in overbought territory for shorts to filter out weak momentum. Volatility is accounted for via the Average True Range (ATR), which dynamically adjusts the stop-loss distance to prevent premature exits during high volatility.

Settings

Backtesting Window

• Start/Finish Year, Month, Day: Defines the date range for the strategy backtest.

EMA

• EMA Length 1: The period for the fast EMA (default 50).
• EMA Length 2: The period for the slow EMA (default 200).

Stochastic RSI

• K / D: Smoothing periods for the Stochastic RSI components.
• RSI Length: The lookback period for the underlying RSI calculation.
• Stochastic Length: The lookback period for the Stochastic calculation.

ATR Stoploss Finder

• Length: The period used for ATR calculation.
• Smoothing: The moving average type used to smooth the ATR (RMA, SMA, EMA, WMA).
• Multiplier: Multiplier applied to the ATR to determine the stop-loss distance.
• Show ATR Bands: Toggles the visibility of the ATR-based stop-loss levels on the chart.

Profit Target

• Reward to Risk ratio: Sets the take-profit level as a multiple of the initial risk.
• Move SL to breakeven: When enabled, the stop-loss shifts to the entry price once the price reaches the defined Breakeven RR.

FAQ

How do I use the 2 EMA + Stoch RSI + ATR Strategy?

Apply the script to your chart and ensure the trend filters (EMAs) align with your timeframe. Monitor the Stochastic RSI for overbought/oversold crossovers that meet the higher-low/lower-high criteria for confirmation.

Can I change the risk settings?

Yes, the risk is fully customizable via the ATR Multiplier and the Reward to Risk ratio settings in the script inputs.

How can I access 2 EMA + Stoch RSI + ATR Strategy?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.