Two EMA Channel Trading System For MT4

Two EMA Channel Trading System 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 Two EMA Channel Trading System For MT4 is a bit more advanced trading system and it can be used in a diversified way. With the help of this trading strategy, traders can trade the market like swing or intraday traders. And those who are good at following the rules may use this system to scalp the major currency pairs.


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The Two EMA Channel Trading System For MT4

This system identifies the direction of the trend by using higher period SMA. The short-term trend is assessed with the help of the lower period SMA.

Let’s have a look at indicators for this trading strategy:

  • Simple Moving Average (SMA) 60 (applied to high)
  • SMA 60 (applied to low)
  • SMA 240 (applied to high)
  • SMA 240 (applied to low)

After installing the indicators, the chart should look like the below image:


The intensity of the market volatility and direction of the trend is evaluated with the help of SMA 240 high and SMA 240 Low. The image above shows that the long-term trend, pointed by a parallel dynamic channel (in red color). If the price trade above the channel, we should look for buying opportunities. On the other hand, if the price trades below the channel, we should be looking for the short trades.

The Simple Moving Average is one of the popular methods to measure the market direction.  Setting up a higher period in the SMA, we can reduce the market noise and get better data.  So, we will try to rely on the higher time frame to get a more accurate reading from the SMA. And for the period in SMA, we will be using 100, 200, or 240 periods SMA. After that, we need to relate the price movement with the red-colored channel printed in the main chart.

After identifying the major trend, we will reinforce our analysis with the help of SMA 60 low and SMA 60 high, represented by a dynamic green channel.

If both green and dynamic red channels show the same direction, we will take the trading decision.

Moreover, if the red-colored channel crosses the green-colored channel, we should prepare ourselves to ride the short-term trend change.

 

Two EMA Channel Trading System For MT4 - Bullish Trade Setup

We have already stated, the system can be used in multiple ways. Those who are looking to use this strategy to scalp the market should be extremely cautious about the trading conditions. If the market fails to fulfill any conditions, the trade signals should be ignored.

Bullish Trade Conditions

  • The price should be trading above the SMA 240.
  • SMA 60 should be above the SMA 240.
  • The slope in all SMAs must be positive.
  • Price should be trading above 60 SMA.



Entry

After checking the conditions, we can take the long trade with low risk. You might think the trade signals are very accurate but do not forget trading is more like dealing with the probability factor. So, we should not risk more than 2% of our account balance in any trade.

 

Stop Loss

The 240 SMA will act as a strong support level. So, traders may place their stop loss below the 240 SMA. If the price breaks below the 240 SMA, the trade setup should be considered as invalid.

 

Take Profit

We can determine the take profit by using the manual method. Usually, the take profit for this system is set to the nearest support level. But this should set in such a way so that the risk to reward ratio for the trade is better than 1:3 ratios.

 

Two EMA Channel Trading System For MT4 - Bearish Trade Setup

Now let's see the conditions to take the short trade. The steps are very similar to the long trade setups.

Bearish Trade Conditions

 

  • The price should be trading below the 240 SMA.
  • SMA 60 should be below the SMA 240.
  • The slopes in all SMA must be negative.
  • The price should trade below 60 SMA.



Entry

After evaluating the market conditions, we can take our short trade. But risk management rules should be followed precisely so that we can deal with the losing trades.

 

Stop Loss

The functions of the 240 SMA will be closely related to the functions of the resistance. In fact, we may consider the 240 SMA as our dynamic resistance line. So, we can place our stop loss right above the 240 SMA. However, it better not to take the trade when the stop loss points exceed 60 pips.

 

Take Profit

Since the developer of this system suggests not to use SL over 60 points, it is better to avoid the trades that give us a 1:1 risk to reward ratio. The take profit should be determined by analyzing the nearest support level in the chart.

 

Two EMA Channel Trading System For MT4 - Conclusion

The Two EMA Channel Trading System can provide you easy means to find quality trade signals. But to find reliable trade signals, you must learn the functions of the system in the demo account. Even if you learn to use this system in a rational way, you should maintain a minimum 1:2 risk to reward ratio. If you trade with negative risk to reward ratio, you are going to have a tough time in dealing with the losing trades. And be sure that you will definitely have some losses.

Note that no system in the Forex market can generate 100% profitable trades. You should be prepared to deal with the occasional losing trades as it may reduce the stress associated with losing trades. And try to synchronize yourself with this system by using a practice trading account. There is no reason to risk your real money in the learning stage since you can get access to the demo account free of cost.

 

 

Download the complete system description and the files here:

FREE Two EMA Channel Trading System

Download the FREE Two EMA Channel Trading System for MT4.

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