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Short-term channel trading

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  • Short-term channel trading

    Short-term channel trading
    In this case, by short-term trading in the channel (CT) we mean opening a position and maintaining it in the interval from several minutes to several hours. The possibility of CT scan is connected with the fact that side trends appear on the market, lasting several hours, less often several days. At CT, the width of the trading channel, as a rule, does not exceed 50 basis points (bp).

    The rules of work with a short-term "flat" tested by experience differ depending on the channel width:
    1) channel width up to 30 bp. A position is opened in the area of ​​several points after a rebound from the channel lines and must be accompanied by a stop-loss order no more than 20 points away from the channel boundaries. Thus, it is possible to protect the position from significant losses. On the whole, experience shows the low efficiency of the given operations: profitability is low, and the amount of risk is very significant, since the exit from channels of this size is often accompanied by a significant price movement (Figure 1.3).

    2) channel width 30 - 50 bp. The rule for opening a position is the same as for the channel width of 20 bp, but the stop-loss order should be placed further from the channel border. This is due to the fact that an abrupt exit from this channel is not an everyday phenomenon and is accompanied, as a rule, by the presence of factors of a fundamental nature. Quite often, a reversal or correction of the formed trend occurs in no more than 20-30 bp. after breaking through the channel line. Therefore, the main recommendation would be to monitor the "volatility" of the market over the period of several previous days. In general, trading in such a channel can be quite profitable and more or less safe. The only problem is that it can take a significant amount of time to identify this channel (Figure 1.4).

    As a CT option, you can consider trading with the simultaneous opening of opposite positions. This will avoid the risk of losses associated with a breakout of one of the channel lines (Fig. 1.5).

    In this case, the profit will be:
    P = 15 - 5 -10 + 30 = 30 bp

    If both positions are closed at the stop-loss level, then the profit calculation will be:
    P = 15 -5 -10 +10 = 10 bp