When trading contracts, don't just fixate on the EMA line! It is always lagging behind!
The same EMA55, when the market drops, it acts as a resistance; during oscillations, prices will repeatedly cross it, showing no clear direction. Only by looking at the actual price movements alongside the EMA can you truly understand what the trend is doing.
For instance, in the example just now, there are actually four steps:
At first, a small triangle forms during the downtrend, then it breaks down and continues to fall, with the EMA above acting solely as resistance.
Next, at the bottom, it starts to consolidate, with prices testing the lower points back and forth, even faking a drop, but crucially, the bears fail to make new lows—this is the earliest sign of a reversal.
Then, the price breaks out of the consolidation zone, retesting the previous highs and EMA55. Although it drops back a bit, it doesn't break the structural low, indicating that the bulls are gradually regaining control.
Ultimately, this last segment is genuinely strong: the price breaks above EMA55, surpasses previous highs, and shows consecutive bullish candles, shifting the trend from 'maybe reversing' to 'it has indeed reversed'.
Therefore, looking solely at the EMA, it is a lagging indicator. However, when observed together with price action, it will alert you to whether the trend is losing momentum, whether it is reversing, or if it has already entered a strong phase.
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