Channel Pattern Forex Swing Trading Strategy
This is a simple strategy that is easy to implement and have a potential to gain good profits. You must know how to draw channels if you want to use this system.
Channel trading is about the price running between support and resistance levels. In this situation, the price is just staying within the channel until it breaks out.
To draw the channel, you first need to identify the points where you want to start drawing your channel from. You need a minimum of 2 points to draw a channel. next is you connect these points with a trendline.
Trading rules:
- Wait for the price to come either both sides of the channel line.
- Once price touches the channel lines, open a trade based on which side of the channel line the price touches: SELL if it touches the channel line above. Buy if price touches the channel line below.
- Buy on the market price as soon as the price touches on the channel lines or place pending orders such as buy stop or sell stop.
- Place stop loss 10-15 pips outside the channel line if you are trading on a 5-minute chart, 20-50 pips on outside the channel line if you are looking on a 4-hour chart.
- Take profit options: Set profit target based on the length of the channel in pips, or you can take profit target halfway point in the channel, or you can take half of your profits off the table when price goes to halfway in the channel, or take profits to 3 times the amount you risked: for example, if you stop loss is 20 pips then set your take profit target to 60pips.
To manage the trade move your stop loss when the price moves in your favor. You will be stopped out if the stop loss is too small. Move stop loss when the price moves halfway up or down the channel. You may consider taking half the profits of the trade and leave the other half running.
Open NZDUSD chart to view template
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