CHANNEL TRADING
When channel trading we use using parallel lines which make up our channel. These provide high probability trade setups all the time. They consist of two parallel lines which price bounces and reverses from.
They are levels of support and resistance so follow the same rules. These channels have to be ascending or descending, if they are horizontal then that means the price is consolidating or ranging.
Remember these lines are areas of support and resistance. Plot them exactly how you would plot trendlines and join them from candle close to candle close, not always from wick to wick. You can see from the charts if you prematurely entered where the price fluctuated, you may have been fooled into buying at the level of resistance. But if you wait for the all-important candle close, this will give you a clear idea of where price is heading.
Below is a brief description of how you could make your trade set-up a higher probability setup by using counter trendlines within your parallel channels
Things to remember when channel trading:
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- Draw parallel lines on from candle close to candle close
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- Sell rejection of the resistance
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- Buy the bounce of the support
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- Use counter trendlines for better entries
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- Channels on higher timeframes are preferred
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- Look for reversal candlestick formations around these key areas
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- Try to take appropriate trades to the trend where you can
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e.g. Long trades in bull market and short trades in bear market.