Page 76 - CMA Journal (July-August 2025)

Articles Section

Another method for getting precise results is adding a In this we discuss few only.
moving average with the pin bar. There is one more
question: which moving average do we have to add to
get good results? For that, there are different techniques,
and I discuss only one over there to keep the topic short.
It depends on the time frame that you are using; like a
smaller time frame such as a 15 min chart we can use 13
MA or 20 MA, and for a 5 Min chart we can use 8 MA, and
for days we can use 200 MA. So basically, it all depends on
the scrip and personal experience which Moving Average
is giving you good results.

We conclude that as the market comes to touch the
Moving Average and also there is a pin bar formed, so
there is double confirmation of change of trend and the
trend got changed. Now the question is there are two In the above figure we are adding two indicators for
kinds of candles that can be formed: either a bullish pin entering the market: one is support and resistance and
bar or a bearish pin bar; in this we can see a bearish pin the other is EMA (exponential moving average). As the
bar in the uptrend which is not considered to be good pin bar touches the EMA near support and resistance and
but still there is an upward trend. Similarly, bullish pins in pin bar is also formed, we enter into the market.
uptrend are considered to be good, and bearish pin bars
in uptrend are not considered to be good but still work,
so pin bars work in both trends.
There are different types of moving averages we use for
technical analysis:
1= DMA (Day Moving Average)
2= SMA (Simple Moving Average)
3= EMA (Exponential Moving Average)
As we discussed above the simple moving average, now
we can use in this method the exponential moving
average. Formula for EMA is as under:
In the above figure we are using two EMAs 50 and 200. 50
EMAt = (Pt × α) + (EMAt−1 × (1 − α))
is used for short term period and 200 is used for long
Where: term period, and as the pin bar forms near 50 EMA we will
enter into the market for the short-term period, and if it
• EMAt = EMA today
forms near 200 EMA then we can take a long-term
• Pt = Price today (usually closing price) position, and stop loss will be near the previous candle
low or high as the condition will be, and profit taking
• EMAt−1 = EMA yesterday
ratio will be 1:2.
• α = 2/(N+1) = Smoothing factor
• N = Number of periods
(e.g., 10-day EMA, 50-day EMA, etc.)
Step-by-step Example (10-day EMA)

1. Calculate the smoothing factor (α):
α = 2/10+1 = 2/11 ≈ 0.1818
2. Start with a Simple Moving Average (SMA) for the
first EMA value:
EMA first = SMA of first 10 prices
In the above example we enter the market as the next
3. Apply EMA formula from day 11 onward: candle opens and the pin bar is closed, and stop loss will
be the low of the pin bar.
EMA11 = (P11 × 0.1818) + (EMA10 × 0.8182)

74 ICMA’s Chartered Management Accountant, Jul-Aug 2025