MA Candles Channel Trading Strategy For MT4
Please note: This strategy was publicly published in the trading community and is free to use. We do NOT make an attempt to decide if this strategy is profitable or not, because we know that the major factors regarding trading results are the skills/experience of the trader who executes the strategy. Therefore, we are mainly explaining the components and rules of the strategy. If applicable, we are highlighting advantages, disadvantages and possible improvements of the strategy.
The MA Candles Channel Trading Strategy For MT4 is a forex trading strategy based on multiple moving averages and trend channels which are formed around these moving averages. As you probably know, moving averages are often used to define the direction of the trend. Trend channels are used to define if the market is overbought or oversold.
This strategy is shipped with the necessary indicators which can help you to detect the direction of the trend, oversold/overbought conditions and possible entry signals.
Let us now examine in detail how the strategy provides this information.
What is MA Candles Channel?
When you load the template of the strategy onto chart then you will notice that the price bars/candles have changed their color. This happened because of the indicator MA Candles.
The MA Candles indicator checks if the closing price of a candle is above the corresponding moving average. If that is the case then the candle gets a green color. If the candle closes below the moving average then the candle is drawn red.
The aim of this visual guidance is that you can quicker determine if the price action is defined as an upward trend or a downward trend.
But as you probably know, one of the biggest drawbacks of moving averages is that it is a lagging indicator. Therefore, don't take the trend information delivered by the moving average as a given fact. Always double check the price action visually.
With growing trading experience you will also develop the skills to judge the direction of the trend by looking at the price action.
The MA Candles Channel Trading Strategy For MT4
The inventor of this trading strategy uses multiple moving averages and trend channels to define the direction of the trend and to define the entry signals.
The following four indicators are used for this purpose:
- Simple Moving Average (SMA)- period 233
- Simple Moving Average (SMA)- period 56
- MA Candles Channel Indicator- value (9, 34)
- Stochastic Histogram- value (14, 3, 3)
Let’s plot these indicators in the chart and see how it looks like:
According to the rules of the strategy, a moving average with period 233 is used to determine the direction of the main trend (the bigger trend). A trend channel is drawn around this moving average which gives you the information if the price is overbought or oversold in relation to this main trend.
If the price moves above the MA(233) then the main trend is defined as bullish. If it moves below the moving average then the main trend is interpreted as bearish.
There is a second moving average with a smaller period of 56. This moving average is reacting faster to changes in the price action and therefore defines the direction of the smaller trend. This smaller moving average also comes with a trend channel with which you can determine the oversold/overbought situation in relation to the smaller trend.
Using two moving averages (1 slow, 1 fast) and their corresponding trend channels is a more sophisticated approach than only using one slow moving average which is lagging a lot behind the actual price action.
With the bigger moving average you will have the trend information in relation to a higher time frame. With the smaller moving average you will get the trend information from the lower time frame (the time frame of the chart).
In addition to the two moving averages, the strategy uses a Stochastic Histogram Indicator to filter the signals. According to the inventor, the Stochastic can filter out lower probability signals.
Let us now have a look at the exact entry rules of the strategy.
Bullish MA Candles Channel Trading Strategy For MT4
The following list shows the criteria for a valid buy entry according to the rules of the strategy.
Bullish Trading Conditions
- The price is above the MA Channel 233. This tells you that the ligger trend is bullish.
- The MA Channel 56 crosses above the MA Channel 233. This tells you that the smaller trend bullish too
- After that, a bullish candle appears above the upper part of the MA Channel 56.
- The stochastic Histogram moves above the zero lines and points higher.
How to Enter the Trade?
The trade will be ready to enter once all 4 conditions are met. A candle needs to close above the MA Channel 56. Therefore, wait for the price to close above the MA Channel 56 and ensure that more than 50% of the candle’s body is above the channel.
Stop Loss Idea
The bullish sentiment will be active as long as the price is above the lower part of the MA Channel 56.
Therefore, set the stop loss below the MA Channel 56 with a 10 to 15 pips buffer.
Take Profit Idea
Take profit is an important element of a trading strategy. There is no way to believe that the profit will run for a long time in forex trading.
Therefore, based on the market sentiment, you should get out of the trading as soon as the price moves maximum 1:2 risk vs. reward. Moreover, make sure to take some partial closing and move your stop loss at breakeven as soon as the price creates a new high.
Bearish MA Candles Channel Trading Strategy For MT4
The following list shows the criteria for a valid sell entry according to the rules of the strategy.
Bearish Trading Conditions
- The price is below the MA Channel 233. This tells you that the bigger trend is bearish.
- The MA Channel 56 crosses below the MA Channel 233. This tells you that the smaller trend is bearish too
- After that, a bearish candle appears above the lower part of the MA Channel 56.
- The stochastic Histogram moves below the zero lines and points lower.
How to Enter Sell Trade?
The trade will be ready to enter once all 4 conditions are met. A candle needs to close below the MA Channel 56. Therefore, wait for the price to close below the MA Channel 56 and ensure that more than 50% of the candle’s body is below the channel.
Stop Loss Idea
The bearish sentiment will be valid as long as the price is below the higher part of the MA Channel 56.
Therefore, set the stop loss above the MA Channel 56 with a 10 to 15 pips buffer.
Take Profit Idea
Based on the market sentiment, you should get out of the trading as soon as the price moves maximum 1:2 risk vs. reward. Moreover, make sure to take some partial closing and move your stop loss at breakeven as soon as the price creates a new low.
MA Candles Channel Trading Strategy For MT4 - Summary
Overall, this trading strategy is suitable for all traders from beginner to advanced, and it includes all elements to consider it as a complete strategy. However, as every experienced trader knows, trading knowledge and constant practice makes you a better trader. No trading strategy alone will make you profitable. You have to develop the proper skills to execute the strategy correctly and to develop a "sense" when to overwrite the fixed rules of the strategy.
Please note that you should always use a demo account when you learn a new trading strategy. This will help you to avoid financial losses during the learning curve which comes with every new trading system. On a real money account we suggest a conservative money/risk management where you should not risk more than 1% of your trading capital for each trade.
Download the complete system description and the files here:
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