A Channel is formed when we draw a trendline after which a line parallel to the trendline with most of the cost action if not all falling between the two lines. By scanning a few charts, you will discover it is simple to identify channels. Channels occur frequently.
However, currencies rarely stay in a narrow range for long and have a tendency to breakout from a tight selection and produce a strong tendency in the market. Important financial information releases can act as a trigger for a breakout.
A common situation may be a channel shaped just before the launch of an important US economic data. The chances of a breakout under this kind of situation would be high. So, this very simple channel breakout trading strategy entails looking for a narrow channel formed prior to some fundamental market event like the release of an important economic data. In addition, it can be used to identify a channel formed just prior to the open of a major financial center like the London Open.
You can take advantage of this channel breakout strategy on intraday charts such as the 5 minutes, 15 minutes, 30 minutes as well as on daily charts prior to the announcement of some important financial release.
Input long when the price action breaks above the upper channel line using a stop loss positioned just beneath the upper channel line. Use a trailing stop as the price moves in your favor.
Similarly, enter short once the price action breaks under the lower channel line with a stop loss placed just above the lower channel line.
Now, in case of a breakout in the upward direction, extended entry order will be triggered.
And if the breakout is about the downside, short entrance will get triggered. Put a stop loss immediately and use a trailing stop if the downside move persists. Channel Trading is not exotic. By scanning a few graphs, it is easy to discover a currency pair trading at a channel. Most of these channels get shaped prior to a major fundamental announcement in the marketplace. First attempt iptv trading strategy onto your demo account!