Extended M and W Patterns (EMA Method)

This strategy targets M and W patterns that form when price is extended away from the moving averages. The EMAs act as "magnets" pulling price back, giving these setups a higher probability of reaching target.

Setup Requirements

EMAs to Use

Plot these three Exponential Moving Averages:

  • 50 EMA
  • 100 EMA
  • 200 EMA

In TradingView, use the "Moving Average Ribbon" indicator and change from SMA to EMA in settings.

Valid Setup Criteria

  1. Price must be extended away from ALL three EMAs - not touching or near any of them
  2. A valid M top or W bottom pattern forms in this extended area
  3. The Pattern Completion Level (PCL) should be near or past the nearest EMA (usually the 50 EMA)

Target and Stop Loss

Target

  • The nearest EMA (typically the 50 EMA)
  • As each new candle forms, the EMAs move - adjust your take profit accordingly

Stop Loss

  • Standard M/W stop loss rules apply (below the W low or above the M high)

Risk:Reward

  • Minimum 1:1 R:R required - if the setup doesn't offer at least 1:1, pass the trade

Trade Management

The 90% Rule

If price reaches 90% of your target and shows a reversal candle (pin bar or engulfer):

  • Close the trade manually
  • Don't wait for the full target
  • A 0.9R win is better than watching it reverse to a loss

Adjusting Take Profit

Because EMAs move with each new candle:

  • Recalculate your TP after each candle close
  • The 50 EMA may shift toward or away from current price
  • This is especially important on longer trades

Advantages of Extended M/W Trades

The EMA "pull power" makes these setups:

  • Less sensitive to news events - the magnetic pull often overrides short-term news reactions
  • Less sensitive to roadblocks - minor resistance/support levels matter less when price is far from the EMAs
  • Higher probability of reaching target - extended price has a strong tendency to return to the mean

When to Use This Method

Use Extended M/W when:

  • Price has made a strong impulsive move away from the EMAs
  • All three EMAs (50, 100, 200) are clearly below price (for M top) or above price (for W bottom)
  • The PCL aligns with or exceeds the nearest EMA level

Checklist: Extended M and W

  1. Plot 50, 100, 200 EMAs on chart
  2. Price is extended away from ALL EMAs
  3. Valid M or W pattern forming
  4. PCL reaches or passes the nearest EMA (usually 50)
  5. Risk:Reward is at least 1:1
  6. Set TP at nearest EMA level
  7. Adjust TP as EMAs move with each candle
  8. Apply 90% rule if reversal candle appears near target