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Price channel is very the legend in the market situation, when the graph can be pinched between two parallel or close to parallel direct. Thus, price must touch the line at least twice and never to cross it to a large extent. A minimum of two points are known, it is possible to draw a straight, from-for what there is a condition on the number of touches. Price channels can be divided into lateral, which is formed by flat market conditions, and downhill, produced in the presence of trend in the market.These channels are commercial tools to help in the work of currency speculators.
Examples of the price channel
In Fig.1 it is possible to observe an example of a sloping price channel. It is worth noting that there are a large number of principles of their construction, but in almost every case there is something subjective in the decision that it is considered those points will be based on video.
Some of the conventions in any case will be present, no matter how trying the traders to bring clarity and objectivity to what is happening in the market. We see in Fig.1, are a small price breaks through the channel lines that are considered to be false penetrations. On the one hand it seems logical, on the other hand is quite uncomfortable in the trade, which will be discussed below.
How to use price channel?
If the opening trades to take the price breaks through the channel, in this case, as can be seen on Fig.1, we will occasionally generate significant losses, as the breakout can be false. That would leave the principle open positions former, but to filter the options with false breaks, use the indentation from the channel.
For example, for the transaction not to when the price breaks the channel, but it must pass from the point of breakdown. Only under this condition the speculator enters into the transaction. Of course, such retreats are about your inputs, but their number will probably be not so much.
A weakness of this option is that with the development of any movement in the market, the more will be the price, the less she left to go in the same direction. Perhaps this can be considered a logical statement, and even axiom. This means that the larger will be our retreat, the greater part of price movement we lose. This caveat also worth considering wanting to pick a significant deviation from the line of the price channel.
In Fig.2 shows an example lateral price channel. Another feature of channels is that there is no way to understand in advance that we will observe. Channels well built when it already has enough points. As a rule, after the construction of the channel structure in the market is supported long.
Traders often joke about that price channels are good only to look at history. However, there are certain methods of trading, when the channels can really be useful to currency speculators.
Using the features in the behavior of prices, traders have found this method of trading like scalping price channel in the Asian session. The fact that in this period of time for a number of currency pairs there is flat that take into account and use some of the currency speculators.
It was observed that the price is not, as a rule, to break the line of the channel formed in the Asian session. Finding such a pattern, people began to trade on a "retreat". In other words, as soon as price approached the line, the trader opened the trade. If the price touches the upper line, then a sell transaction, if the lower, then buy.
Immediately there were many varieties of not only themselves trading the nuances, conditions, filters, but by themselves the ways of formation of the price channel. Some speculators began to use expanded from the rise volatility options, and someone is chosen for the agreement only "hang up" in the direction of the trend. Many scalping strategies are designed for use in the Asian session, is based on price channels.
The channel helps to visualize trend or flat market, to determine their trade are important levels that can be considered lines of the channel. This is a very controversial trading tool that in addition to convenience and clarity, adds to the work of the speculator some moments of bias that do not suit some traders.
Now there are many varieties of the considered constructions which have their strengths and weaknesses, which manifest themselves in different behaviors. In any case, a General understanding of channel needs, building and other General information the trader know will be very useful.
|Category: Forex | Added by: (06.11.2017)