How To Use EMA FILTERS • Pine Script [OUTDATED V4] Tutorial

hi traders in this video i'm going to show you how to create an ema confluence filter for your scripts so basically what that means is here i have two emas plotting onto my chart we have a 50 ema here and 100 ema below it and for this particular script it doesn't matter what entry reasons you detect in your script you can be detecting any candlestick pattern that you like but for today's example i'm keeping it very simple and the entry reason we're detecting is just simple engulfing candles they don't have to be swing lows they just need to engulf the previous candle and what this script is doing is first of all price must be above this 50 ema before a valid signal will be detected but the 50 ema must also be above the 100 ema before a valid signal is detected and so in today's video i'm going to show you how i created this script so first of all let's remove the script reset the chart and create a new blank script so here i am with a blank script let's get started first thing i'm going to do is always is get user input and for today's video we're just going to get two uh inputs two ema length inputs so here we have two inputs ema length one ema length two of type integer and we're just going to set it to 50 and 100 by default and the next thing we're going to do is get the actual ema's so we need ema1 is set to ema close with the length of ema length 1 this input here and then we'll just copy this paste it down here and change these to two so there's our emas now we can draw them to make sure that they're working properly so the first one i'm going to plot as ema1 and i'm going to change the color based on where the price is above or below it so we're going to say is the close above ema 1 if so set the color to color.green otherwise set it to color.red and we're going to give it a line width of two let's thicken it up a little bit now copy this line of code paste it in there change this to ema2 and we'll just get rid of this because it'll be confusing to have both ema's changing color we'll just set this second ema to color.blue and we'll just thicken it up a little bit change the line width to three save the script we shouldn't have two emas drawing there perfect and so now in order to get the filter and detect whether these ema's are above or below each other we need to detect some entry reasons so here i'm going to say detect entry reasons and again this could be any entry reason you want i'm just using engulfing candles today because they're an easy example so i'm going to create two variables here long entry and short entry long entry is going to be set to whether the current candle close is greater than or equal to the previous candles open and did the previous candle close as a bearish candle or a doji was a previous candles closing price less than or equal to the previous candles opening price and then it's just the opposite for a bearish engulfing candle so there's our long entries and short entries now we can plot these to the chart so create a new section of code here call this plot entry signals and we'll just use plot shape for this not plute shape plot shape uh long entry i like to do it this way if you don't do it this way i'll show you what happens in a second but what we're doing we're saying if we have a long entry then set plot shape to 1 which means it will plot a shape otherwise plot n a and we'll give it a style of shape dot pro up for a bullish candle and the color will be color.green and the location will be location dot below bar so just really quickly let me save the script make sure that's working there we go so now the reason why i like to do it this way because we could just get rid of this code here and this will still compile if i save the script you can see it's doing exactly the same thing the difference is up here so when we have a signal you can see that this plots 1.0000 or however many decimals are on your price chart but now if i go to any candle that does not have a signal we're also getting 0.000 this is obviously a long number and if you've got a lot of plots in your script these numbers can add up quickly if you have six digits plotting for every single shape on your chart whenever there's a no signal it'll just really clutter up your chart so i like to add this little bit of code in here so what we're saying is we're saying if we have a long entry detected then set this plot shape to 1 which means true it'll just draw the shape otherwise plot n a so now if i save the script you'll see that when we hover over any candle that does not have a signal we're just plotting n a it's much shorter than a six digit number so that's why i do that here let's move on copy this line of code paste it in here get rid of blow bar because by default this plot shape plots above the bar and for bearish signals that's just fine so we're going to plot shape for every short entry and the color of color.red now if i say the script we'll be getting bearish engulfing candles plotting to our chart as well but we're not taking into account our ema filters yet so for that let's add a new section up here called get filters we're going to have a long filter and a short filter now our long filter is going to be there's a couple of ways we can do this first of all we could just check if the emas are in confluence so we could just say here is ema1 greater than ema2 or is ema1 less than ema2 for a short filter then if we add this boolean into our entry reason detection down here so short filter and long filter combined with our long entry and short entry conditions now if i save the script we'll only be getting long bullish engulfing candles plotting if this 50 ema is above the 100 ema and vice versa for shorts we'll only be plotting bearish signals if the 100 ema is above the 50 ema so that's the first part of an ema compliments filter and this works just pretty pretty good works pretty fine actually uh but if you want to take it one step further you can also detect if price action is below this 50 ema for shorts or above for longs so if we wanted to we could add into this long filter is the current close greater than ema 1 and is the ema 1 above our ema2 and vice versa for short so we could say is the price of the current candle below ama1 and is ema1 below ema2 so when i save the script here this entry pattern here is going to go away as is this one here and this one up here so now if i save the script so there we have it so now we're only plotting signals if the 50 ema is below the 100 ema and price action is below the 50 ema and the opposite for long trades so that's one way to apply an ema filter uh but before i end this lesson i thought it might be interesting to show you guys how you can disable your ema 2 in your script in case you have a script that has this functionality in it but you want to allow both options for your users so you want to allow the user to disable ema2 and only use the ema1 as your filter the easiest way to do that is to just set ema 2 to 0 ema2length to 0 and detect that in your script so i'll show you what i mean right now so down here we can change our filter to say is the closing price above our ema 1 and is ema1 above ema2 or is ema length two equal to zero and copy that down into there and so now our filter will return true if price is above the ema and our emas are in confluence or we've disabled ema2 by setting its length to zero now the problem is if i say the script will get an error whenever i come up and set this to zero because you cannot have if i click on that it'll tell me the error we cannot have a length of 0 passed to the ema function must be above 0. so what we need to do here is say ema length 2 equal to 0 question mark then set it to 1 otherwise set it to ema length 2. so what we're saying here is we're saying for our second ema if the user has set ema length 2 to 0 then we just want to get an ema with a length of 1 otherwise we do want to use our ema length 2 parameter because it's set to something other than 0. so now if i say the script that will work just fine if we come up here and we set email length 2 to 0 we'll be getting any signal that closes above or below this 50 ema but you can see we're also plotting our second ema with a length of one so if we come down to where we plot our emas and we check here if our ema length two is set to zero so ema length two equals zero question mark then we want to draw n a otherwise we actually do wanna draw our ema two so now let's save the script minimize that come up to the settings menu and set ema length two to zero our second ema goes away and it is now no longer being considered in our filter check uh if you didn't understand anything in this video just rewatch it it'll make sense i'm sure but basically what we're doing here is we now have two emas if our first ema is above our second ema and price action is above our first ema then the script will be looking for long trades otherwise if our first ema is below our second ema and price action is below the first dma then the script will look for short trades and if you want to you can come into the settings menu here set ema length two to zero hit ok and now this script is only using the first ema as the filter this is a very simple filter very simple method but it works very well but finally one last thing that i have found useful in my own scripts is to detect how many candles are above or below the ema preceding the setup so for example in this case you can see we have two candles that closed above the ema immediately preceding our setup what happens if you want to invalidate the setup based on this condition as well i'll show you how to do that really quickly so here we come up here and above our filters let's add in ema breach check and what we're going to do here is we're going to create two new variables we're going to say bars above ema and bars below ema and this is going to be set to 0 by default then we're going to use two for loops here we're going to say 4 i equals 0 2 and let's create a new input variable up here i will say e may look back and this is just going to be another input with a title of ema lookback a type of integer and a default value of three so we're going to look back three bars and count how many bars are above or below the ema and incorporate that into our filter so here i can change this through to ema look back and now we can check if the close of our current iteration we can just put i in here which is this guy here so if the current adoration of our loop our for loop looking back if the closing price of that candle is above the ema one then we want to set bars above ema to bars above ema plus one and we can also check in the same for loop we can also count how many bars close below the eme so here we'll say if the closing price of the current iteration of this loop so you know we're looking back one two three candles if the current candle is below the ema or the previous candle or the one before that then that will increment our bars below variable by one so this is how we count candles beyond the ema so now if i save the script should compile without any errors there we go now all that's left to do is add these checks into our filters so i'm going to create one more user input here it's going to be called max bars beyond ema it's going to have a title of max bars beyond ema it's going to be of type input.integer and have a default value of one so we're only allowed one bar to close beyond the ema over the past three candles by default for a signal to be considered valid so now if i come down to our long filter and short filter we can add on the end here and bars for a long trade where checking bars below ema is less than or equal to max bars beyond ema and the opposite for short trades we're checking and bars above ema is less than or equal to max bars beyond ema so now if i save the script we come up to the settings menu and we turn off our second ema that will bring back this example here and look at that we are now invalidating this setup here because we have had more than one candle close above this 50 ema over the past three bars so now if i come up to the settings menu here if we change this max bars beyond ema variable to 2 let me click ok this setup will come back because it's now considered valid because we can have a max of two candles closing above the ema for short trades and obviously for long trades it is the opposite so back here if i set this back to one ah sorry if i set this to zero that will invalidate this setup here because we've had one candle close below the ema so this is a great way to avoid taking signals around the ema when price is consolidating around it so typically speaking when the ema is tested as support or resistance and price responds from it it's often likely that we only have a maximum of one candle closed below it if we have more than one candle close below it preceding a setup then that usually means that the ema is being ignored so that i found in my personal trading that the optimal setting for this filter is one bar beyond the ema over the past three bars preceding our setup so if we zoom out a little bit look for some examples so you notice we're working off closing prices here not wix because any wix test in the ema is a good sign that's a bullish sign that this ema is acting as support and pushing price up but if price hovers around the ema for a little bit too long such as in here we do not want to be going short on any short signals if price is consolidating around the ema because that means we're either entering a period of consolidation or price wants to reverse so i hope you found this lesson interesting i'm going to leave it there i don't want it to get too long we covered a lot of subjects here we've covered how to create a single ema filter we've covered how to create two ema filters in confluence with each other we've covered how to create a filter with an ema breach look back so we're searching back three bars counting how many bars close beyond the ema so above the ema for short trades below the ema for long trades and if we have too many bars closing beyond the ema then we're adding that filter in our script as well and there's just a few ideas for you to play around with in your own scripts to add some ema filters to potentially optimize your strategy scripts or your setup detection indicators if you have any questions shoot them to me otherwise i will see you in the next lesson good luck with your trading good luck with your coding speak to you soon have a great day if you found this video helpful and you want to learn more about pinescript head over to panscriptmastery.com i have an advanced course there with 70 plus lessons covering pinescript from the basics all the way up to more advanced topics such as strategy scripts and complex indicators and if you don't want to pay for anything that's fine i've got a free course there as well that goes into great detail about the core fundamental concepts you need to know in order to use pine script effectively so i'd love to see you there go and check that out if you're interested in that otherwise hang around hit that subscribe button and i'll be back with more free content really soon thanks for watching i'll see you next time you

Channel: The Art of Trading

Views: 14,136

Keywords: tradingview, pine script, tradingview indicators, forex algo, crypto algo, stock algo, trading algo, trading algorithm, how to create trading strategies, how to code your own trading scripts, trading scripts, forex scripts, crypto scripts, stock scripts, bitcoin scripts, trading signals, forex signals, crypto signals, stock signals, detect trading setups, pine script mastery, pine script mastery course, how to use tradingview, how to use pine script, scripting, ema

Id: xud0IdskTf4

Length: 18min 31sec (1111 seconds)

Published: Tue Aug 25 2020