Author: Nikolay Kositsin
Forum on trading, automated trading systems and testing trading strategies
newdigital, 2013.10.14 14:40
Price Channels is a helpful technical analysis indicator to determine buy and
sell signals based on price breakouts.
The user-defined time period is generally 20 periods. To further illustrate
how a price channel is created a chart of the Nasdaq 100 ETF (QQQQ) is shown
Price Channels are used mainly to identify price breakouts. The buy and sell
signals are shown below in the chart of the QQQQ's:
Buy when price closes above upper bands. This is like buying a breakout above
resistance, the resistance just happens to be whatever the highest high was of
the past 20 trading days.
Sell when price closes below lower bands. This would be like selling a
breakout below support, but the support in this case is whatever the lowest low
was of the previous 20 trading days.
Price Channels offer an easy to follow method of buying and selling stocks,
futures, or currency pairs.