Introduction to the SHI Channel True Indicator
Plotting trendlines is probably the most basic skill that technical traders would develop. However, it is also probably one of the most effective technical analysis techniques that traders would have. Identifying the correct trendlines and channels allow traders to anticipate the direction of price, as well as the area where it could reverse.
The SHI Channel True Indicator is a tool which simplifies this process as it automatically identifies trendlines and channels.
What is the SHI Channel True Indicator?
The SHI Channel True Indicator is a custom technical indicator which automatically plots a channel based on price action swings.
This indicator plots three lines which form a channel like structure. The top line is the resistance line of the channel and the bottom line is the support line. Its middle line is basically the median of the support and resistance line of the channel.
How the SHI Channel True Indicator Works?
The SHI Channel True Indicator uses the most recent major swing highs and swing lows of price action to identify the main support or resistance trendline. These swing highs and swing lows use the same concept for identifying swing highs and swing lows as the Zigzag Indicator.
If the most recent major swing points are the lows, then the channel is formed based on the support line, while the resistance trendline is drawn parallel to the support line at a distance which would cover the range of the channel.
Inversely, if the most recent swing points are swing highs, then the basis for the channel would be the resistance trendline. The support line is then drawn parallel to the resistance trendline at a distance which would cover the range of the channel.
The middle line is basically the midpoint of the channel. It is basically drawn halfway between the support and resistance trendlines.
How to use the SHI Channel True Indicator for MT4
The SHI Channel True Indicator has a couple of settings which modifies how the channel is drawn.
The “All Bars” variable refers to the number of bars in which the SHI Channel True Indicator would identify swing highs and swing lows in which it would base its support and resistance lines.
The “Bars For Fract” refers to the number of bars which the indicator would consider as a fractal pattern.
SHI Channel True Indicator as a Trend Direction Indicator
The SHI Channel True Indicator can be used as a trend direction indicator. This is because the angle of the channel it plots gives a clear indication of where the trend is moving. It slopes up whenever the market is in an uptrend and down whenever the market is in an uptrend. The steeper the slope, the stronger the trend.
SHI Channel True Reversal Areas
Although the SHI Channel True Indicator is not a signal indicator, it can show the areas where price may reverse. In an uptrend, the support line would be the ideal reversal area, while in a downtrend, the resistance line would be the ideal reversal entry area.
Conclusion
The SHI Channel True Indicator is not a signal indicator which would provide entry and exit points. However, it is a very useful tool that could help traders spot potential trade setups based on support and resistance trendlines.
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