A Channel Trading Strategy
Channels are formed often in the currency market. A channel is formed when support and resistance are horizontal and the range is narrow.
But it is very difficult for these currencies to stay bound between a narrow range. Sooner rather than later, these currencies break out of these narrow channels. Most of these breakouts occur on some important economic news release.
Currencies start trading in narrow ranges before the announcement of important economic news release as well as before the start of an important trading session like the European or the US market session.
You can use this channel breakout strategy on intraday charts like the 5 minutes, 15 minutes, 30 minutes as well as on daily charts before the announcement of some important economic release.
When the economic news release is made, price action will breakout in either the up or down direction. In case of a breakout in the up direction, enter long. Place the stop loss 10 pips below the upper channel line.
In case, the breakout takes place in the down direction, enter a short trade with stop loss above the lower channel line and use a trailing stop if the downward move continues.
You can also enter two entry order, one long and other short 10 pips above and below the two channel lines prior to some major economic news release.
In case of a breakout on the upside, the long entry order will be triggered. Place a stop loss 10 pips below the upper channel line. If the market move in the up direction develops into a major upside move, use a trailing stop to stay in the trade as long as possible with maximum pips on your side.
And if the breakout is on the downside, short entry will get triggered. Place a stop loss immediately and use a trailing stop if the downside move continues.
Article Source: FxTradingStock.com
About the Author
Mr. Ahmad Hassam has done Masters from Harvard University. Try these Forex Signals by two top gun traders in a friendly competition. Learn this powerful Fibonacci Retracement method FREE that pulls 500+ pips per trade.
by: Ahmad Hassam
Total views: 29
Word Count: 323
Date: Wed, 1 Dec 2010
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