FOREX Parallel channels
algorithm forex strategy Parallel channels:
Parallel channels - one of the most common chart patterns in forex charts. They give the traders excellent opportunities for earnings , regardless of whether the market is now trending or not trending state, as well as in what time frame you are trading.
Horizontal channels are known as "trading range" or "consolidation" - in cases where the foreign exchange market is no trend (purposeful movement up or down). uplinks appear on the chart when the market is moving steadily upward, downlink channels appear in a downtrend. No matter in what market conditions are now the market is - parallel channels are found always in different shapes and sizes .
Consider the following example:
in the range from mid June to early July 2007 futures S & P 400 MidCap E-mini move on the chart in the uplink, as you can see at the bottom of the submitted hourly chart. Although MidCap and was near its record high price, it is still trading in a large trading range. Parallel channel gives us a glimpse of part of the lateral motion.
Parallel channels can be defined as soon as we find two peaks and two bottom (they are marked with crimson rectangles on the chart). As soon as we have been able to find such a channel, we can use the following strategy Trade : must wait for the price on the chart close to the upper or lower trend line and determine the set-up.
At this point there are two options:
1. price tends to push the boundaries of concurrent channels and go in the opposite direction it up or down, such as ping-pong ball.
2. possible breakdown of the boundaries of concurrent channels. Or price breaks strengthens the dominant trend, or breaks in the opposite direction of him, turning at the same time.
In this example, after the 5th contact boundaries of concurrent channels (in this case lower) price bounced from the border and came up.
But the upward movement was not strong and did not last long. Price at the same time was less than fifty percent of the distance to the upper limit of concurrent channel, then turned again to the bottom line of this trend. Once the price reached the bottom of the channel, then we got a confirmation signal that the chart pattern is likely to have finally emerged. graph shows us the visual outlook of the market in the near future, preparing for the consolidation or a reversal . Although already at this stage it may seem that the opening of short positions will help us earn money, but in reality it remains too early to conclude the transaction in the opposite direction of the trend long until we get further evidence - a lower maximum or the conversion of the lower trend line of support for resistance .
deal on the sale, we discover, at a time when the price on the chart returns to the former the lower trend line, which turns into a resistance line on the chart. At that point, once the price touches the trendline, then turns down and eventually breaks through at least the preceding bar, so it gives us a good signal to davolno open a trading position for sale.
Stop-loss orders can be placed slightly above the trend line, at the highest high of the bar, which was preceded by a breakdown of the line is considered a trend. Upward trend line break would say that the above calculation was wrong, and the entrance to the market we hurried.
first profit target has been determined at this level, because it is very well seen the level of support you are viewing. second profit target may seem even more perfect, as it is about round number - 900. In addition, this area is also visible support as before about this level, there was a reversal of the trend upward.
The first specific objective was achieved very quickly, because on the chart < strong> was formed gap down. Here we need to fix some profits and put in trade trailing stop for the remainder of the trading in the open position. Stop-loss is move the gap to the bottom at 912. If price can break through this level up, it's better to liquidate the remainder of the trading position. But, as we see in our example - the price has not been able to break through this level.
After a small downward trend continued to consolidate their movement and we reached the second, we have defined, profit target and successfully closed the trading position at a profit.
Parallel channels are found at all time intervals , entrances and exits in the market while working with them very clearly visible to the naked eye even. Therefore this pattern provides an excellent balance of risk to expected return . Well, to trade on these patterns is very simple. All we nazhno for this is to define this pattern on a chart and wait for its development in low-risk set-up and try to make money at it ralizatsii.