Trading Strategy with Channel Trend

Channel trend is one pattern that is often formed on trading charts. Channel or range of price movements can always be formed either when market price movements are trending or sideways (ranging).

Uptrend channels are formed from parallel lines that are made above the uptrend line when price movements begin to reverse from high points, while downtrend channels are formed by parallel lines created below the downtrend line when price movements start to reverse from the low point. Channel trend shows the consistency of market movements in adhering to trend lines.

First pull the support line created by connecting the 2 closest support levels, and the resistance line drawn from the lowest high level is parallel to the support line. Looks for support points on the support line (uptrend line) and resistance points on the resistance line. Both lines must be parallel to confirm the formation of an uptrend channel, while the points of support and resistance do not have to be right at the line of support or resistance. This is in accordance with the uptrend characteristics, namely the formation of higher low or low levels higher than the previous low, and higher high or high levels higher than the previous high. Conversely for the downtrend channel.

Determine the level entry and exit

After the trend channel is identified, the next step is to determine the entry and exit levels (stop loss and limit or take profit). Trading with a trend channel is basically the same as trading based on support and resistance points such as a strategy that is often applied in sideways conditions, so that the entry and exit can be at those points.

For an uptrend, the easiest way is to enter buy at the support level confirmed by the oscillator indicator to determine the exact entry time when the market conditions are oversold, or sell entry at the resistance level when the market is overbought. The oscillator indicator that is often used is RSI, stochastic or CCI.

For long positions, the stop loss can be determined by a few pips below the support level assuming if it turns out that the price moves through the nearest low level (which means the uptrend channel is no longer valid), we can exit as soon as possible. For the level limit or take profit a number of pips can be determined below the resistance line level assuming if the price turns towards before touching the resistance line we can still exit. The opposite for short positions. Usually trading with this strategy will result in a risk / reward greater than 1: 1.

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