Using Channel in Forex

 Pricing channels could be a good technical trading strategy for trending markets. Perhaps one of the reasons they‘re so popular with market technicians is e they‘re easily recognizable in your charts, and can also be just as simple to plan a trading strategy around if you understand things to look out for. Today we‘ll review how you can identify a pricing channel, and how you can organize a trading strategy by applying this charting pattern.

First, let’s understand how to discover a pricing channel on our charts. This could be made by identifying and connecting a series of highs and lows in your graph, which should become levels of support and resistance. Below we will see a descending channel upon the AUDUSD 2Hr chart. Notice how resistance is formed by connecting the 2 previous highs to form a type of resistance (price ceiling ). Since resistance is descending, support (floor ) ought to be descending along with the AUDUSD creates a series of lower lows. These lows should run parallel towards the resistance line which was a previously drawn completing the value channel pattern.

The AUDUSD in your example today is taken into account a descending price channel, but it ought to be noted that channels can also rise inside an uptrend and trade sideways in ranging markets. When the pattern is identified together with its direction, a trader can then prepare to enter into the marketplace.

Learn Forex – USDCHF 4Hour Trend
Channel_Trading_Basics_body_Picture_2. png, Channel Trading Basics

(Created using FXCM’s Marketscope 2. 0 charts )

Trading the Channel

Once a price channel is identified, identifying areas to trade becomes a really straight forward proposition. Trading pricing channels is a lot like trading a range since we‘ll pinpoint regions of support and resistance for out entries. Inside a descending pricing channel, such like the AUDUSD seen below, traders will look to sell the marketplace on the test of resistance. Traders will look to sell during this gradual downtrend and take advantage or price reaching to lower lows. It’s crucial to recognize that trading channels is ultimately a support and resistance strategy. That implies that traders will wait for their chance to enter the marketplace and never trade when prices reside between these levels.

Learn Forex – USDCHF Channel Entries
Channel_Trading_Basics_body_Picture_1. png, Channel Trading Basics


(Created using FXCM’s Marketscope 2. 0 charts )

Exiting Positions

No matter your trading strategy, traders should always possess a intend to exit the marketplace. One among the rewards of channel trading, is stop and limit levels are built around our previously defined levels of support and resistance. Inside a downward sloping channel, stops ought to always be placed above a degree of resistance. In case that price begins printing higher highs, traders would want to exit positions to sell the AUDUSD as soon as possible.

Profit targets will certainly be set by using the support line from the pricing channel. Traders will extrapolate this value by extending our line upon the graph. Traders would want to exit positions having a limit order, when price touches this area of support. When the channel usually is to continue, price may bounce to resistance at this stage, continuing our descending charting pattern.