Forex trading system “4 EMA and Channel”
Simple but effective system “4 EMA and Channel” is designed for medium and long term trading on Forex market. The system is suitable for all currency pairs, metals and other financial instruments. Four-hour and daily charts are used for analysis and determination of entry points. Serious work will require adjustable brokers.
The system is based on two moving average lines with a period of 10. One of these lines is drawn on maximum bars (high), the other – on minimums. Both of these lines form a channel, the price behavior relative to which gives the reference points to enter the trade. If the price goes upwards, we buy, if it goes down, we sell. Inside the channel, we refrain from trading.
Four exponential moving averages (EMAs) are used to refine the input and output parameters. On the attached template, 50 EMAs are marked in red, 23 EMAs in purple, 112 EMAs in blue, and 4 EMAs in brown. Yellow lines indicate a channel of two 10 EMAs.
For this system, there are two possible options for trading – aggressive and conservative. In case of aggressive trading, we open a position when the price goes out of the channel. In case of conservative waiting for confirmation of the price position relative to 50 EMA and the intersection of the other middle lines.
This picture shows a conservative login on the daily chart. In addition to the above channel, the price rose above 50 EMA, and EMA 4 and EMA 12 crossed the top of EMA 23. Here the take-profit is set at 200 points and the stop-loss is set at the level of the lower EMA 10. Aggressive entry was possible much earlier, but it would have ended in losses.
This picture shows an example of sales on a four-hour chart. A sell position opens if the price is below 50 EMA and has fallen below the channel. The other middle lines confirm the movement. Stop-loss is set at the upper edge of the channel. As the price moves, the stop-loss moves. In this case, the position is closed when the price reaches the top yellow line. You can also set a fixed Take Profit, but it depends on the volatility of the currency pair. For EUR/USD it is recommended to trade 60-70 pips on four-hour charts and 150-200 pips on daily charts.