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Horizontal channel trading

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  • Horizontal channel trading

    organizing in a horizontal channel
    Channel trading is trading up and down from support and resistance levels, the lines of which are the boundaries of the channel. This tactic works well in sideways trends ("flat") and is almost completely inapplicable in uptrends or downtrends.

    The rule for opening a position can be formulated as follows:
    Determine support and resistance levels. Correct calculation will help to get the boundaries of the channel in which the market moves.
    When the price reaches one of the channel boundaries about the rebound of the price line in the opposite direction, you should open a buy position if the rebound occurred from the support line and, conversely, a sell position if prices reached the resistance level.
    When the opposite border is reached, the position is closed. It should be noted that a price reversal can occur before the price line reaches the channel boundaries, so it is possible to close positions before reaching support or resistance levels.
    The advantage of this tactic is the ability to maximize profits by opening and closing positions several times if the sideways trend continues. The main disadvantage is that a breakout of channel lines can lead to significant and unnecessary losses. To prevent the latter, it is necessary to correctly set stop-loss protective levels, at which unprofitable positions are closed if the market moves in the opposite direction from the intended direction (Figure 1.2).

    If there is confidence in the continuation of the market movement, then at the stop-loss level, the position can be "reversed".