Forex traders tend to squeeze profit from the smallest waves of financial markets, and that’s why they usually prefer short-term trading strategies. In fact, trading on larger time frames can enable them to make money more substantially from such a volatile market like Forex than constantly looking to time changes. The mid-term strategy named “Fourteen” has been developed to serve that purpose.
This “fourteen” system is totally composed of the most popular indicator in the financial trading industry: Moving average (MA). There are three moving average lines combined in this strategy, two of which are near-term simple MAs and have the same period setting of 14 days but different applications (one applied to “high” and the other applied to “low”), used to identify trading opportunities. The remaining MA is an exponential one with much longer duration (200 days), highlighting long-term market trends.
As we already know, Forex is considered one of the most effervescent financial markets because of its formidable fluctuation on every business day. Short-term currency traders after months trying to take quick profits will find themselves being tired, therefore they will gradually change to use longer-term strategies. This “fourteen” technique is entirely suitable for swing traders who understood the survival rules in Forex trading, and now intend to generate returns in the long run.
Having carefully been tested for the last eight months, this technique has made for us more than 1100 pips with a win-rate of about 85%. Despite the fact that it’s not the most profitable strategy, the “14” system is worth trying.
How to use the “fourteen” system to trade Forex
This strategy works best on the one-day chart. After installing the required indicators easily found in MetaTrader 4 software, traders will observe the EMA (200) to define the current trend, then gather signals from the short-term SMAs.
A bullish opportunity is confirmed when:
The EMA (200) confirms an uptrend.
The higher SMA (14) stays above the EMA (200).
A daily candlestick crosses above the higher SMA (14).
On the contrary, a bearish opportunity is defined when:
The EMA (200) confirms a downtrend.
The lower SMA (14) remains below the EMA (200).
A daily candlestick turns below the lower SMA (14).
Traders should only enter one position at a time, and at the opening of the next candlestick after affirming that the prior one closes above/below the near-term SMAs.
The stop-loss level should be 150 pips, and the take-profit one could be up to 200 pips. After passing about 100 pips toward the expected direction, the stop-loss should be transferred to the breakeven point.
Pros and cons of the “14” system
Being composed of popular indicators is a very big advantage of the “fourteen” system, helping traders easily establish it. In addition, traders only need to look at the charts once a day to grab trading occasions instead of sitting beside their computers and observing the platform. However, this technique requires a high level of patience since it’s applied on the daily chart
The “fourteen” strategy is an effective technical system and entirely suitable for Forex traders who can’t sit all day beside their computers. We believe that sticking disciplinarily to this tool will help generate stable returns. However, when using it to trade, please remember to apply basic technical knowledge along with risk controlling and psychological managing methods to minimize the risk.