The market entry is performed when the price breaks any border of the price channel. The entry is conducted in two directions simultaneously (locking). In that case, the double spread is lost (since two trades are opened). Take profit and stop loss levels are set for each trade. The stop loss level is always slightly less than the take profit one. The level is defined in percentage of the channel size.
Thus, when these two orders reach a certain level while moving upwards or downwards, one of the orders is closed by stop loss, while another one stays open for some time. If the price moves the same direction a bit longer, that order is closed in profit exceeding the loss from the first order.
The frequency of closing in profit is considerably higher than the frequency of closing in loss, since the price should pass only a small part of the channel in order to close in profit, while it should pass two entire channels to close in loss. The take profit/stop loss percentage ratio is approximately 95% to 5%!
- Length – price channel length;
- kStops – ratio for calculating the stop loss (relative to the channel).