First, before you can trade a price channel, you need to identify on
your graph. This process can be done relatively easily using basic
technical analysis or some indicators from CodeBase. Traders should first identify and connect a series
of highs and lows on your graph. As I told - it may be done by indicators or manually.
Below we can see an example of this
process on a EURAUD
4 Hour chart. Notice how resistance has been formed by connecting the
two previous highs to form a ascending line of resistance. Since
resistance is rising, this means support should be rising as well as
with the creation of a series of higher lows. These lows should run
parallel to the resistance line that was previously drawn completing the
price channel pattern
Trading the Channel
Once a price channel has been identified manually or by indicators so we can then take a plan of
action for trading it. Trading pricing channels is much like trading a
range since we will pinpoint areas of support and resistance for entry
order placement. Traders will look to buy the market
in an uptrend in the event price bounces from support up to a higher
high.
It’s important to remember that trading a pricing channel is ultimately a support and resistance strategy. That means that traders will wait for their opportunity to enter the market and not trade when prices reside between these levels.
