Channel trading strategy. Forex channel strategies - basic, medium and best options

With a certain assumption, it can be argued that the entire price movement in the foreign exchange market takes place within a particular channel. It all depends on what timeframe this channel is built on. This feature of the price movement is the basis for all channel strategies.

Forex channels, in principle, are self-sufficient and you can trade even without using additional tools. But most often, several confirmations of the received signal are used. For example, Fibonacci retracement levels, candlestick analysis, MACD divergences. Depending on how many additional signals are received, you can, for example, adjust the size of the working lot.

Forex channel strategy provides only 2 options for the development of events: the price either bounces off the channel border, or breaks through it. Different trading systems offer different criteria for the rebound and breakout of the channel, and accordingly, the rules for entering the market are different. It is also of great importance what type of channel is used in a trading strategy.

Forex channel strategy: types of channels and their features

Any trading terminal makes it possible to use several channels:

• equidistant channels;
• Fibonacci channels;
• linear regression channel;
• standard deviation channel;
• also, Y-shifted moving averages can be used as channel boundaries.

The equidistant channel is the most common type. Despite the simplicity of construction, it is highly efficient. In order to build an equidistant channel, you need to have 3 points (extremums on the price chart). A baseline is drawn through 2 highs / lows, and the opposite border of the channel is drawn through the 3rd point. Forex channel strategy using this type of channels shows good results.

Fibonacci channels. As in the equidistant channel, the main channel line is set, but beyond the opposite channel boundary at a distance of 0.618; 1.0; 1.618 and 2.618 parallel lines are drawn. In addition, the trader can set additional lines parallel to the channel at an arbitrary distance from its border.

Linear regression channel. To draw it, a trader only needs to select a certain area on the chart, the channel will be built automatically. The distance from the center line to the channel boundaries corresponds to the maximum distance from the closing price to the center line.

The standard deviation channel is similar to the linear regression channel. Only in this case the distance between the central line and the channel boundaries corresponds to the standard deviation of the closing price from it. By the position of the price relative to the center line, one can judge the mood in the market.

Specifics of working with a channel strategy

Any Forex channel strategy requires strict criteria for price breakout and rebound from the channel border. It is at this stage that most newbies make serious mistakes. As a rule, they take the touch of the channel border by the chart as a rebound, and a small "puncture" of the channel as a breakout. Of course, profitable trading is impossible with this approach.

It is possible to talk about the rebound from the channel border only after the candle that touched its border has closed. The significance of the received signal increases if the rebound is accompanied by a reversal candlestick combination (for example, bullish / bearish engulfing) and divergence on the indicator.

As for the channel breakout, there are 2 ways to trade in this case. You can try to take risks and enter the market directly at the time of the channel breakout, this approach is considered risky. It will be much more reliable to wait for a small rollback after a rapid breakout and conclude a deal already on the retest of the broken channel. If the retest coincides with the Fibonacci retracement level, then the signal strength increases.

An example of concluding a deal using a channel strategy

In the considered example, the price has been moving within the descending channel (built on h4) throughout the month. During this movement, on a smaller timeframe, a number of lower-ranked channels can be identified, which can also be used for trading. To find divergences, it was used with standard settings.

Any Forex channel strategy starts with building a channel and tracking price behavior within it. It will not be superfluous to build several channels at shorter time intervals. Then you need to track the price behavior when it approaches the channel border. It should be remembered that priority is given to signals received on a higher timeframe.

If the price touched the channel and closed inside it, then a rebound is possible. You can enter the market if you receive at least 1-2 confirming signals (divergence, candlestick combination). It is recommended to set the SL level beyond the nearest extremum. In this case, it is necessary that the ratio of TP and SL was at least 1: 2, 1: 3.

In the considered example, in the end, there was a breakout of the channel. If a trader adhered to a conservative trading method, then he would be able to conclude a successful deal on the retest of the broken channel. The truth of this breakout is confirmed by the fact that the retest coincided with the 38.2% retracement level from the last upward movement.

Nuances of working with a channel strategy

The main disadvantages of channel strategies include some subjectivity when building a channel and the lack of generally accepted criteria for breakout and rebound. To build a channel, you only need 3 extreme points on the chart, but each trader chooses different extreme points. In addition, the channels are adjusted quite often, which also affects the trading results.

Despite the absence of generally accepted criteria for channel rebound or breakout, it is recommended to pay attention to the price behavior near the channel border:

• if the channel breakout was carried out in one breath, with 1 - 2 candles, then there is a high probability that it is true. But it is still recommended to wait for the channel retest;

• if, after a rebound from the channel border, the price does not go in the right direction, then it is recommended to at least rearrange the deal to breakeven;
• it is recommended to make deals in the direction of the trend on a higher timeframe.

The Forex channel strategy is of interest also by the fact that over time it does not lose its efficiency, as it happens, for example, with indicator strategies. All that is required for profitable trading is strict adherence to the rules and a competent selection of auxiliary tools. Source:

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We will talk about a simple Forex strategy based on channel building.

How to get a strategy that will become a panacea for financial problems? This is not an easy task. Finding a system that is easy to understand can be difficult.
But sometimes the lucky ticket still falls out to those who were looking for it. If you are one of those, then “” is created especially for you.

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The market is constantly changing. He moves under the influence of a variety of factors. Prices go up and down. Less often they stand still.

This condition is called the term "flat", read -. Currency pairs can change the appearance of the chart in several scenarios.

Channel strategy is an easy way for a Forex beginner.

Where can you apply?

One of the scenarios is an uptrend or a downtrend. The second is flat. The price has been idle for a long time. At such moments, the foreign exchange market is in a state of calm.

The third state of the market is a price corridor within some boundaries. This is called a channel. Within this channel, the price moves up and down.

At the same time, there is also a main trend. It can be rising or falling. The channel strategy for the Forex market provides for trading in this case.

Is one of the best and most versatile trading strategies. It is actively used by traders of the OTC derivatives market.

The channel strategy will help, that is, make a profit in those areas of price changes that are within the channel. It can be observed by analyzing the measured movement of currency pairs in the area of ​​the designated corridor.

Watch

Here's a video on the topic:

We can say thanks to the versatility and simplicity of the Forex channel strategy, for those who clearly follow the rules of this approach to trading, you can read the article -.

It allows you to achieve significant success. Even a beginner can do it. Of course, despite the simplicity of this strategy, one should not forget about the elementary trading conditions.

You need to close profits in a timely manner. This will avoid the problems that greed leads to. We are talking about large financial losses.

Application rules

The effectiveness of a channel strategy in the Forex market directly depends on the availability of a stable price channel. Moreover, such a channel should be located within one time interval.

It is not recommended to use such a strategy in the framework of a high probability of a sharp change in the direction of price movement.

The basis for the designation of the channel is the three recorded extrema, which are located at the end of the chart. The channel boundaries are drawn along parallel lines.

One of them should connect two maximum points, and the other through a minimum point. And also, according to the mirror version. The most extreme values, which are located in the shadow of the candles, will be the natural limiter of the lower and upper limits of the price corridor.

Attention should be paid to the fact that the distance that separates the extremes does not change the nature of the chart. If a large number of candles are grouped close enough to each other, and at the same time, the so-called group extremes can take place on the chart, then the channel border line, in this case, can be drawn through the highest value from the right.

Signals that indicate the need to open a position when the channel boundary is reached while moving inside it.

It is allowed to cross the border and stop, for example, at the level of 8-10% of the value of 50-70 points of the predicted movement to the target.

The target, then, should naturally be set on the opposite side of the channel.
The Forex channel strategy provides for opening only one position, which will contain a certain number of lots.

After you have opened a position, you need to concentrate on exiting the market. In order to find and fix such a moment, the stop is moved to the opening point, when the price has passed 90-100 percent of 70 points of the predicted path in the direction of profit.

The next stage will be a trailing stop, or a squeeze when the next 50 points are reached in 10. It is important to remember that no squeeze is made towards a loss.

After reaching the channel border, the position is closed and a new one is opened in the opposite direction.

If the stop has worked towards the loss, then you need to make a reversal. In other words, open a position in the opposite direction and set a target at fifty-seven points.

If the second stop loss is triggered, then it makes sense to stop trading and take a break for a few days.

Practicing traders know a very important feature of the movement of the price line within the interval located in the channels.

After the upper or lower channel border is broken, the price moves to a segment that is within the absolute value of the channel width.

In order to determine the width of the channel and receive an additional signal before the start of the market race, there is a special class of indicators called (follow the link, I talked about them there, also read the article - and -).

The role of indicators in channel strategy

Oscillators are indicators that characterize the market. They are usually effective in the stationary market.

When the price moves within a fairly narrow "market band". Among the well-known indicators of this type, mention should be made of:

1. Force index
2. Average True Range
3. Bears Power
4. Bulls power
5. Envelopes
6. Momentum
7. Moving Average of Oscillator
8. Relative Strength Index
9. Relative Vigor Index
10. Wiliams percent range

A simple strategy is the path to success

Today there are many strategies that promise good profit to the trader. But not all of them can boast of simplicity and affordability.

Beginners often find it difficult to understand the rules that need to be followed. At the same time, they may be required to be very observant and active enough to commit extraordinary and risky actions. In such conditions, there is only one method. Simplify the trading system and trade through.

Channel trading is one of the most profitable and easiest in Forex. Its success is based on the fact that the price is in constant motion, then falling, then rising. As a result of such movements, price channels are often formed, which can be both short-term and maintain a trend for a long period of time, bringing a considerable profit to the trader. Trading within the channel is based on price rebounds from the borders of the price channel, which are support / resistance levels, which are usually used as or. In this article, we will look at what channel trading is, what advantages and disadvantages it has, as well as analyze the main channel trading strategies. See also which are the best.

Types of price channels

There are three types of price channels:

In this case, the price channel can be confirmed when the horizontal level or trend lines have support in the form of two points of contact with the channel boundaries, and unconfirmed when the channel passes through only one point. Such a channel is considered unreliable; it is recommended to build channels at least two points apart.

Building price channels

It is believed that the simplest and most profitable price channel is the horizontal (flat) channel, the boundaries of which are the support level on the one hand and the resistance level on the other. At the same time, the width of such a channel must be at least 30 points in order for it to bring good profit. However, building trend channels also does not take much time and effort. To build such a channel, it is required to draw trend lines along two lows from below and two highs from above so that the trend lines are located at an equidistant distance from each other. It is allowed when individual Japanese candlesticks or their tails go beyond the price channel, but in general, price rebounds from the channel boundaries should be observed. Over time, the price channel becomes obsolete and additional channels need to be built. It is not recommended to delete outdated channels for some time, as the price may still return to them.

Benefits of channel trading

The main advantage of a channel trading strategy is to maximize the profit that can be obtained from multiple trades. When trading in a channel, you can apply a profitable strategy, when a number of deals are opened in the direction of the main trend, and they are closed when the total is reached. You can open deals in both directions, both for sale and for purchase, when the price touches the opposite border of the channel. This mainly applies to those channels that are located at an angle of 45 ° or less. However, if the channel is at a sharper angle, it is recommended to open trades exclusively to the side. Another advantage of channel trading is the minimal level of risk. Stop loss is placed outside the channel boundaries at a short distance from the opening price, which makes channel trading even more profitable and safer.

Disadvantages of channel trading

The main disadvantage of channel trading is that a breakdown of the price channel can occur at any time, which can lead to significant losses. This is why it is so important to use a safety stop loss. Its application will avoid the accumulation of unnecessary losses and protect you from unplanned losses. In addition, it is always necessary to have a breakout strategy on hand, since a trend reversal or price exit from a flat is always followed by a large movement that carries a high profit. Another disadvantage of the channel trading strategy is the close position of the stop loss to the opening price. Sometimes levels arise when 1-2 candles go beyond the channel boundaries, knocking out stop-losses, and then the price continues to move in the desired direction. It is also not recommended to prematurely transfer the position to, as the price can retest the level, which will lead to the closure of the position. It is necessary to wait for the formation of the first or the moment when the price reaches the middle of the channel. It should also be borne in mind that the price does not have to touch the channel border. Sometimes it does not reach the channel border a little and turns in the opposite direction. This must be borne in mind when setting goals for profit taking.

Channel trading strategies

Let's consider several options for channel trading strategies, which can be attributed to, since the examples described below are completely missing indicators. All we need is trend lines that act as support / resistance levels. The simplest strategy is to directly bounce the price from the channel boundaries. When the price bounces off the lower border of the channel, we enter buy, when the price tests the upper border of the channel, we open sells. You can enter trades both with a market order, waiting for the formation of the setup, and with the help. The target for taking profit will be the opposite border of the channel. Also, do not forget about placing stop-losses, which must be placed outside the price channel. It should be remembered that it is necessary to enter trades not within the channel, but at its borders.

To avoid false breakouts, you need to go to the lower one to determine a more accurate entry. For example, on the 5-minute chart, we see the following situation when the price breaks the upper border of the channel at point 2:

By switching to the one-minute chart, we can determine the end of the correction and a better position of the price to enter the trade.

As you can see from the examples above, channel trading is quite an interesting and profitable way to make money on. Channel trading strategies do not require detailed study and great knowledge. Trading can be carried out on any timeframes and trading instruments, including. You can start trading this strategy almost immediately after reading this article. All that remains is to choose a suitable broker using our independent one.

Hello fellow traders!

Today I will tell you about one of my favorite strategies. We will talk about trading price channels and how to make a profit when trading in them.

First of all, let's go back to the fundamentals of technical analysis and understand what a trading channel is.

Trade channel- This is a limited trading range in which the price moves for a certain period of time. The borders of the trading channel are limited by two lines: support and resistance.

Also, like trends, trading channels are divided into 3 types:

• ascending;
• downward;
• lateral (flat).

Let's consider each of them in more detail and, using their example, we will get acquainted with ways to correctly build a price trading channel.

- is formed on an uptrend movement. As you know, an uptrend is successively increasing highs and lows, therefore, to build an upward trading channel, it is necessary to determine the beginning of the trend movement and the first two lowest lows ( reference points) draw a trend line ( main channel line). Then, parallel to it, project another trend line to the highest point between them.

We look at the picture below:

- is formed on a downtrend. The construction rules for this channel are similar to those used for the upstream channel construction. Only the main channel line is drawn through the pivot points plotted on the highs (since the movement is downward).

We look at the picture:

Side trading channel (flat)- is formed when the price moves in a horizontal price corridor for a certain time, while new highs or lows are not formed. This market condition is called consolidation and occurs either at the end of the current trend, or before its further continuation.

You should also pay attention to the fact that Trading channels can be confirmed and unconfirmed. A channel is considered confirmed when the price touched its borders (support and resistance lines) more than 2 times. Otherwise, the channel is considered unacknowledged.

TRADE IN THE CANAL

Before we go directly to the rules of trading in the trading channel, it is necessary to "finalize" our trade channel by adding a few important lines.

A line equal to 50% of the total width of the range (for example, if the channel width is 600 pips, then this line will be drawn at the level of 300 pips from any border of the channel). Two lines drawn inside the channel from its borders at a distance equal to 10% of the total channel width (if our channel is equal to 600 pips, then the lines are drawn at a distance of 60 points from the support / resistance lines).

Unclear? Then we look at the picture:

Trading in the channel is carried out from its borders (support and resistance lines)... In an ascending channel, we buy at the lower border and sell at the upper one. We fix the profit at the opposite border, as soon as the price enters the zone beyond the 10% line.

Why is that?

We remember that the market is not an exact science and the price behavior in the market is unpredictable, so we can only assume, and in order to minimize risks, we give part of the potential profit to the market, closing the deal before the price touches one of the boundaries.

You can also enter a deal from the 50% line. This level is a strong support / resistance level. But in this case it is necessary to be very careful and it is advisable to enter the market only in the direction of the channel (trend).

Where to place a stop loss? Unfortunately, there is no definite answer to this question. It all depends on your deposit, money management, pair volatility and the time frame on which you work. I adhere to the rule of removing the stop loss for the previous significant market extremes.

If you use indicators in your trading, then you can look for a signal to enter / exit a position from them.

In this figure, we see how the price enters the 10% zone, while the stochastic has an intersection of the fast and slow lines, as well as an exit from the overbought / oversold zone. As you can see, this indicator gives, albeit a weak, but still an additional signal to open a position.

BREAKDOWN TRADING OF PRICE CHANNEL BOUNDARY

Nothing can last forever and any channel will be broken, it's just a matter of time. What should a trader do if this happens? Everything is very simple! In this case, for us, the channel ceases to be a channel, and only one of its boundaries (upper or lower) remains, which will be a simple trend line, and this line, in turn, will be a support / resistance level.

And we will trade on the breakout of the level (if you suddenly do not know how to trade from the levels correctly, then read on).

What are the scenarios for the development of events after a price breakout? There are only 3 of them:

1. The price breaks the level, but the breakout turns out to be false and the price returns to the current price channel. A false breakout is a rather unpleasant thing, but it is a very serious signal that there will be more attempts to break this level.
2. The price breaks through the level (true breakout) and rushes towards the channel breakout with a purposeful movement
3. The price breaks the channel border, goes some distance towards the breakout, and then returns to the broken level. A level retest is in progress.

The safest point to enter a position will be to open a trade on a return to the broken level.

Also, when trading on a breakdown of the price channel (and when trading within the trading channel) it is imperative to wait for the bar to close. It is very important! With hasty actions, you can easily run into a false breakdown and this will seriously fray your nerves.

Another important point worth mentioning is the direction in which the channel was broken. If the breakdown is in the direction of the broken channel, this is a strong enough signal to enter. If the breakout is carried out in the opposite direction, you need to be very careful and careful, as there is a high probability of a false breakout.

But that is not all. There is one more important nuance, which we have no moral right to ignore! And this nuance lies in the fact that any trading channel consists of the same trading channels, but built on lower time intervals. In turn, this channel is part of a channel built on a higher time frame. I call this the “channel nesting principle” or “the matryoshka principle”.

Take a look at the picture below. On it, the "blue" trading channel is plotted according to daily charts, and the "purple" channels are plotted according to hourly charts.

The methods of working with such channels are absolutely the same, but it is important to understand that a price channel built on a higher time frame is more important than channels built on a lower time frame.

Let's summarize and collect what is written above into a specific algorithm of actions.

First, we look to see if the price is currently moving within the trading channel.

• Determine the direction of the trend / channel and outline its boundaries.
• We are waiting for the price to reach one of the channel boundaries.
• We are waiting for a breakout or rebound from the level.
• We place orders.

Once again, I repeat that it is advisable to trade (for a breakout or a pullback - it does not matter) in the direction of the trading channel, since this will coincide with the direction of the trend.

At this point, let me finish. If you still have questions, then we ask them below in the comments or write letters through the feedback.

Good luck in trading!

P. S. I almost forgot. In order to determine the trading channel and correctly draw its boundaries, it is necessary to "fill your hand". I can help you with this. To do this, open the daily chart of any currency pair, rewind a few years back and begin to "outline" all the channels that you see. Believe me, over time, you will get better at it.

It is believed that all price fluctuations in the Forex market occur within certain ranges, the type and parameters of which depend on the timeframe and the current state of the market. As a rule, a channel strategy in Forex is simple, with a minimum of indicators, low risks and high profitability, but at the same time it requires strict adherence to the rules of entry and money management.

General principles of channel strategy

The technical model "price channel" assumes the movement of quotations in a certain limited range for a certain period of time. The tactics of the Forex channel strategy in the foreign exchange market is based on the analysis of two events - either the price breaks the channel border or not. The criteria for determining the true breakout in each trading system are different. Channel boundaries can be rigid or dynamic.

The recommended timeframe for any asset is at least M30. To build a channel (by any method), at least two extrema are required for each border. It is recommended to place orders always only within the channel, even if the border is broken - then in case of a false breakout, the price will return and the deal will be opened automatically. It is necessary to “average” the conditions for building the channel boundaries in order to estimate a greater number of possible extrema.

In the channel zone, orders are opened upon rebound from the borders and in the presence of a reversal signal from additional indicators. If there is no reliable reversal signal, but you are not sure about the current trend, then it is recommended to open two positions: an order within the channel and a pending order in the opposite direction - beyond its border.

The channel strategy in Forex also regulates the behavior within the range: in a falling market, sell signals will be stronger, in an upward one - to buy. The older the channel, the stronger its boundaries.

The size of the primary stop loss is determined by the current market volatility. Below is a general trading scheme using a horizontal channel as an example. We pay special attention to the price behavior near the borders - this determines the direction of trade. It is recommended to use additional confirmations from any oscillator to enter.

If the channel is wide enough, you can use the aggressive method of adding positions. In this case, the stop of the added position should be compensated for by the profit from the main transaction - in case of a reversal or a sharp jump in the price.

We keep the stop level unchanged until the completion of the first rollback. After the formation of the first opposite extremum, it is recommended to move the stop to the breakeven level. If the price moves in a profitable direction, but approaches the channel border, then you should tighten the stop loss and stop adding orders.

• entry above / below the centerline of the channel within the channel;
• entry on the breakout of the upper border of the channel during a bullish trend and on the breakdown of the lower border during a bearish trend;
• setting the primary stop loss too close to the channel border.

Instruments for trading within a price range

Graphically, any price channel can be built manually, but it will be more practical to use standard tools for this purpose:

The idea of ​​trading within a volatility channel has long been developed by the classics of technical analysis and includes many indicators for building channels with dynamic (Bollinger Bands) or hard boundaries (Donchian channels).

An example is the combined indicator Super Signals Channel - for all its simplicity, it gives fairly accurate signals on almost any asset and timeframe.

This indicator draws its boundaries not based on closing prices, but on extreme values ​​- using the ZigZag method. A reversal signal appears when the price reaches the next max / min of a certain sequence of candles. Disadvantage: on small periods, it redraws and gives a lot of false signals on speculative volatility.

An example of trading in a range without indicators

Most often, the Forex channel strategy uses an equidistant channel - despite the simplicity of its construction, it is highly effective. In order to plot it, you need to have 3 extremum points on the price chart. A baseline is drawn through 2 highs / lows, and an opposite border through the 3rd point. Techniques using this type of channel always show good results.

When holding a position according to the Forex channel strategy, it is necessary to monitor the price behavior in the range of higher periods, so as not to stumble upon a stronger border. The most reliable entry points are obtained by trading in the direction of the older trend.

Fibonacci channels also require the indication of the main line, but at the same time additional parallel lines are built outside the main borders along the Fibo series: at a distance of 0.618; 1.0; 1.618 and 2.618. If the price crosses these levels, it is considered a strong trading signal; in addition, you can set the construction of additional parallel lines at an arbitrary distance from the channel borders.

An example of trading with Fibonacci levels

Using Fibo as an additional tool in most cases gives stable results. A confirmation trading signal will be the price behavior in the area of ​​levels, in addition, they can be used to set target points (stop / profit).

If the retest of the channel boundary coincides with the Fibonacci retracement level, then the signal strength increases.

As always, Fibonacci lines will act as current support / resistance and provide additional entry signals.

Channel Forex strategy Keltner Channels + ADX

Indicators: KeltnerChannels with standard parameters, ADX (14) with level 30.

Assets: any currency assets with stable volatility.

Timeframe: H1 and higher.

Trading sessions: Europe, Europe-America.

We remind you: The Keltner Channel is a price envelope above / below the EMA (10), the boundaries of which are built by multiplying its value by the ATR value. To open trades, you need to move the green ADX line beyond the 30 level.

So, we open a sell deal either at SellStop (below the Low of the closed candle), or with a market order after the following conditions:

• the candlestick closes below the lower border of the KeltnerChannels;
• there is an intersection of the lines (-DX) and (+ DX) before the breakdown of the Keltner channel (preferably? crossing the line (-DX) level 30).

StopLoss is set for the local maximum or above the upper line of the Keltner channel.

We reason in the same way: we open a buy either by BuyStop (above the High of the closed candle) or by a market order, provided:

• closing of a candle above the upper KeltnerChannels line;
• the (+ DX) line crosses the (-DX) until the breakout of the Keltner channel (preferably the movement of the (-DX) line beyond the level 30).

We put stops behind the nearest minimum or above the lower channel line.

TakeProfit is usually not placed, and the trade is fixed either as a result of trailing or after the candle is closed: for selling - on a pullback up above the upper line, for buying - on a rollback below the lower line of the Keltner channel.

Instead of a conclusion

The disadvantage of such strategies is considered to be subjectivity in the construction of boundaries and the absence of generally accepted criteria for breakout and rebound. This is why a reliable Forex channel trading strategy always requires confirmation of trading signals, usually from Fibonacci levels or oscillator-type indicators such as RSI, Stochastic, AO or MACD. The main advantage is that channel trading strategies do not lose their efficiency over time, as, for example, indicator techniques. The main thing is to strictly follow the rules and correctly select auxiliary tools.