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Channel trading system

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Sergey Golubev
Moderator
104524
Sergey Golubev  

It is simple trading strategies.

m217irr mentioned about it here but I did not understand it in that time.

This strategy is very good for the beginners and I started my forex with this strategy some years ago. And not me only. I know that Tartan started with this strategy as well and finally we have GoldWarriors EAs. When very experienced traders are losing money they try to trade by this channel for deposit to be recovered but most of them are trading from the borders of the channel to the direction of outside the channel, on break out. But I am not very experienced so I am trading inside. Sometimes I am using it to recover my deposit slowly.

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1. Channel Trading system for H1, H4 and D1 timeframes.

- Indicators and template are on post #8 of this thread.

We can use NonLagZigZag_v2 indicator from here instead of High_Low v2 (ZigZag).

- trading rules for this system: read from page #1 to page #3 of this thread.

This system was well-tested on demo and real account for many months.

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2. Channel Trading system for M5 timeframe.

- indicators and template are on post #255.

- trading rules for this system: to be defined.

Sergey Golubev
Moderator
104524
Sergey Golubev  

We have many channel indicators here and here.

But personnaly I like more simple indicator SHI_Channel.mq4 from here.

Sergey Golubev
Moderator
104524
Sergey Golubev  

Timeframe. I like H4 but some people are using H1 as well.

4 main pairs.

Trading from the borders of channel on the direction of inside the channel.

Sergey Golubev
Moderator
104524
Sergey Golubev  

Signal to enter. If the price is touching the border we are waiting the reversal signals from any of the indicators we are comfortable with. If the price is touching the channel two times and did not break the channel out it means that price will be inside the channel (most probably). So it is our case.

Personally I did not wait until the price will touch the border two times: I waited for the reversal and open the order. If we are not sure about reversal we may place pending order. But all the orders should be placed on the direction to inside the channel.

Sergey Golubev
Moderator
104524
Sergey Golubev  

Stop Loss should be outside the channel at least 50 p. Profit level is an other border of the channel.

Why S/L is not less than 50 p?

Because we can not fully rely on the indicators which we are using. I am using Zigzag and SHI channel and zigzag signal may be disappeared and the channel may be reversed as well. So 50 p stop may be ok.

Sergey Golubev
Moderator
104524
Sergey Golubev  

There are two manners of trading:

- Trading H1 or H4 timeframe in the same manner as we are trading D1: all the price movement inside the channel should be ignored.

- We are looking on M5 or M15 timeframe using Stochastic for example for re-enter on local min or maximums inside the channel. Or we are using fractals on our H1 or H1 for re-enter.

I prefer the first one because second one is more risky.

Sergey Golubev
Moderator
104524
Sergey Golubev  

And there are some trading rules:

- Trade on the direction of the channel;

- Wait until the price will be reversed;

- Wait until the price will touch the channel (before reversing) or will be very near the border;

- Do not move the stop very agressively.

- When the price is riched the opposite border of the channel or just very near it you may close the order (with profit) and do not wait for the break out.

Sergey Golubev
Moderator
104524
Sergey Golubev  

I am using those 5 indicators (attached) together with Parabolic SAR and Envelopes (you should have last two indicators in your MetaTrader).

Also I am using the template (attached).

Trend indicator may be used to avoid any trading in flat market.

3Line_Break indicator - for estimating the reversal together with High_Low v2 (ZigZag):

- when the price is reversed from the border to the up (inside the channel) we will wait to the signal from zigzag and after that will wait until the color of 3Line_Break indicator is changed to the blue one;

- when the price is reversed from the border to the down (inside the channel)

we will wait for zigzag signal and for the color of 3Line_Break indicator to be changed to the red one.

Files:
Sergey Golubev
Moderator
104524
Sergey Golubev  

The images are illustrating it:

we are still waiting for the price to be reversed but we must take into account the flat (Trend indicator).

Sergey Golubev
Moderator
104524
Sergey Golubev  

On the image 1 is H1 timeframe. We are waiting for the price to touch the border of the channel (little more up should be) to go down with the signal from zigzag and red color of 3Line_Break indicator. Flat. But it may be in the evening only (if any).

H4 timeframe is on the image 2. We see that price is reversing but we are waiting for zigzag signal and for 3Line_Break color change after that.

Image 3 is D1 timeframe. The price is reversed and we are waiting as well. It may be reversed up to the Christmas.

Files:
1_1.gif 29 kb
2_2.gif 29 kb
3_1.gif 29 kb
Sergey Golubev
Moderator
104524
Sergey Golubev  

It was USDCHF.

You may do it by yourself for EURUSD: it is not exactly as for USDCHF but similar on D1 for example (with opposite direction).

Why many people like this trading strategy?

Because it is very good trading strategy and very profitable?

No.

Because it is fully visible and understandable from the chart:

we will see our stop (it should be behind the channel but we are always taking into account the border of the channel), we can see our target (an other border of the channel). And we can answer on the "very simple" question "what?!" or "what's on here?" or "Anything?".

We can not answer on the question "why".

That is "why" many people tried to improve this system to have the answer on an other "very simple" question: why.

But it is an other story.