A price channel is a space on a price chart enclosed between a line of highs and a line of lows within which the price moves. The channel can be ascending, descending and horizontal.

The uplink takes place in the uplink. The line drawn at the lows of prices in an ascending channel is an uptrend line. A descending channel is accompanied by a downtrend. The line drawn at the highs in the down channel is the downtrend line. A horizontal channel appears when the price moves sideways (flat). The horizontal channel is limited from below by a support line (passing through the lows), and from above by a resistance line (passing through the highs).

There are many trading strategies that use price channels. Some of these strategies are focused on trading within the channel, some of them are focused on breaking the price channel.

Building a price channel

To build a price channel, at least three points on the price chart are required, the first two should define the resistance (or support) line, and the third should be located at the local extremum farthest from this line.

Let's look at an example of building an upward price channel:

As you can see from the figure above, it took only three points to build the channel. Points 1 and 2 represent successive local minima, and point 3 is a local maximum. An uptrend line is drawn through points 1 and 2, and a line parallel to it is drawn through point 3. The space bounded by two constructed lines represents an ascending price channel.

Now let's build a downstream channel:

As you can see, the principle of its construction is exactly the same. First, a downtrend line is drawn based on two points (descending local maximums), and then a line parallel to it is drawn through the third point (the nearest local minimum).

A horizontal channel, which is a section of a trendless (flat) price movement, is built between two levels. From below, it is limited by the support level, and from above - by the resistance level.

Types of price channels and their construction in MT4

The following four types of price channels are most common among traders:

1. equidistant channel

All these channels are presented in the popular MT4 trading terminal, and therefore, as they are described, I will immediately give references to how they are built there.

The Fibonacci channel involves the construction of a series of parallel lines remote from the main one (trend line or support level) at distances proportional to the coefficients of the Fibonacci sequence.

To build it, you need to set two points (by local minima or maxima) that form a trend line or level.

The linear regression channel is built by simply setting the boundaries of the interval. Just hold down the left mouse button at the beginning of the desired interval, drag to the right and release at the end of the interval you need.

The terminal itself calculates the position of the central line of the channel, placing it in such a way that it is in the center of the selected price range. The two extreme lines that form the boundaries of the channel are located at an equal distance from the central one in such a way as to capture all price values ​​in a given interval.

The Equidistant Channel is an auxiliary tool for constructing the most common channels (ascending, descending and horizontal) according to the method described at the beginning of this section. To build it, you first specify a pair of points for the trend line (in this case, the terminal draws two channel boundaries at once, one at the specified points, the other just parallel to it). Next, you need to move this parallel line to the right place (attach it to the local extremum, according to the method described above).

The standard deviation channel is built on the same principle as the linear regression channel. It is based on the same line, built on the basis of average price values ​​for a selected period of time. Its only difference is that the boundaries are located at a distance of one standard deviation, and therefore they may cover not all prices, but their absolute majority (about 95%).

The Metatrader4 (MT4) trading terminal allows you to build price channels using its standard set of tools. In it, you can build all the types of channels described above. All these tools are in the menu "Insert" - "Channels":

Other types of price channels

In addition to the so-called linear price channels, the boundaries of which are described by straight lines, there are also non-linear price channels. The boundaries of such channels are curves, each point of which is located at a certain (calculated) distance from the central curve, which often acts as a moving average.

The most common non-linear price channels include:

• Bollinger Bands

Bollinger bands are familiar, perhaps, to every even a novice trader. They are presented in the standard toolkit of most trading terminals. In MT4, for example, they are located here:

Bollinger Bands are three moving averages. The main moving average is based on price values ​​and lies in the middle of the channel, while the other two are located on both sides of it at a distance equal to the specified number of standard deviations. The number of standard deviations is selected so that the channel contains about 95% of all prices.

Bollinger bands on the chart

The Költner channel, in fact, is an analogue, or, if you like, a modification of the Bollinger bands. In MT4 it can be found in the section custom indicators:

Költner channel on the chart

Principles of trading through price channels

Trading using price channels involves two main tactics:

1. Trade within the channel
2. Channel breakout trading

Trading inside the channel is based on the assumption that the boundaries of the channel represent relatively strong support and resistance levels. And this means that with a high degree of probability the price will be reflected from them, moving inside the channel. Therefore, the trading strategy within the channel involves selling when the price reaches the upper limit and buying when the price reaches the lower limit. In addition, I recommend applying the following signal filtering:

1. Buy only when the price reaches the lower limit of the ascending channel
2. Sell ​​only when the price reaches the upper limit of the descending channel
3. For a horizontal channel, you can buy whenever the price reaches the lower limit and sell when it reaches the upper one.

Channel break trading implies the fact that sooner or later any channel will be broken. As a rule, such a breakdown is always accompanied by a strong price movement, on which traders make their money. In order to catch this kind of breakdown, it is very convenient to use pending orders.

A pending order is placed at a certain distance outside the channel border (so that it is not knocked out by random price volatility) and is triggered automatically as soon as the price reaches it after breaking the channel border.

A linear channel, by definition, is more predictable than a non-linear channel and allows placing pending orders near its borders (which are obvious in the near future, since they are straight lines). Non-linear channels cannot boast of such predictability, and therefore they are traded mainly by market orders.

You can learn more about trading strategies for each of the described channels by clicking on the links above.

Conclusion

Pricing channels are an integral part technical analysis market, and their competent use can easily form the basis trading system trader. After all, they are based on perhaps the most important tools of all technical analysis - support and resistance lines.

Here are some more tips for using price channels in trading:

With a certain assumption, it can be argued that the entire price movement on foreign exchange market passes through one channel or another. It all depends on what timeframe this channel is built on. This feature of the price movement is the basis of all channel strategies.

Forex channels, in principle, are self-sufficient and you can trade even without using additional tools. But most often, several confirmations of the received signal are used. For example, Fibonacci retracement levels, candlestick analysis, MACD divergences. Depending on how many additional signals are received, you can, for example, adjust the size of the working lot.

The Forex channel strategy provides for only 2 scenarios: the price will either bounce off the channel border or break through it. Different trading systems offer different criteria for rebound and breakout of the channel, and the rules for entering the market differ accordingly. It is also of great importance what type of channel is used in the trading strategy.

Forex channel strategy: types of channels and their features

Any trading terminal allows you to use multiple channels:

• equidistant channels;
• Fibonacci channels;
• linear regression channel;
• standard deviation channel;
• Moving averages shifted along the Y-axis can also be used as channel boundaries.

Equidistant channel can be attributed to the most common type. Despite the simplicity of construction, it has a high efficiency. In order to build an equidistant channel, you need to have 3 points (extremums on the price chart). A base line is drawn through 2 highs/lows, and the opposite border of the channel is drawn through the 3rd point. Forex channel strategy using this type of channels shows good results.

Fibonacci channels. Just as in the equidistant channel, the main line of the channel is set, but beyond the opposite channel boundary at a distance of 0.618; 1.0; 1.618 and 2.618 are parallel lines. In addition, a trader can set additional lines parallel to the channel at an arbitrary distance from its border.

Linear regression channel. To build it, a trader only needs to select a certain area on the chart, the channel will be built automatically. The distance from the center line to the channel borders corresponds to the maximum distance from the closing price to the center line.

The standard deviation channel converges with the linear regression channel. Only in this case, the distance between the center line and the channel boundaries corresponds to the standard deviation of the closing price from it. By the position of the price relative to the center line, one can judge the mood in the market.

Peculiarities of working on a channel strategy

Any forex channel strategy requires strict criteria for price breakout and rebound from the channel border. It is at this stage that most beginners make serious mistakes. As a rule, they take the chart touching the channel border as a rebound, and a small “puncture” of the channel as a breakdown. Of course, profitable trading with this approach is impossible.

It is possible to talk about the rebound from the channel border only after the candle that touched its border has closed. The significance of the received signal increases if the rebound is accompanied by a reversal candle combination (for example, bullish/bearish engulfing) and divergence on the indicator.

As for the breakdown of the channel, there are 2 ways to trade in this case. You can try to take a risk and enter the market directly at the moment of the channel breakdown, this approach is considered risky. It will be much more reliable to wait for a small rollback after a rapid breakdown and make a deal already on the retest of the broken channel. If the retest coincides with the Fibonacci retracement level, then the strength of the signal increases.

An example of concluding a deal using a channel strategy

In the considered example, the price has been moving within a descending channel throughout the month (built on h4). During this movement on a smaller timeframe, a number of channels with a lower rank can be identified, which can also be used for trading. To search for divergences, it was used with standard settings.

Any forex channel strategy starts with building a channel and tracking the price behavior within it. It will not be superfluous to build several channels at smaller time intervals. Then you need to track the behavior of the price when approaching the border of the channel. It must be remembered that priority is given to signals received on a higher timeframe.

If the price touched the channel and closed inside it, then a rebound is possible. You can enter the market if at least 1-2 confirming signals are received (divergence, candle combination). The SL level is recommended to be set beyond the nearest extremum. In this case, it is necessary that the ratio of TP and SL be at least 1:2, 1:3.

In the considered example, in the end, there was a breakdown of the channel. If the trader had followed a conservative trading method, he would have been able to make a successful deal on the retest of the broken channel. The truth of this breakdown is confirmed by the fact that the retest coincided with the 38.2% correction level from the last upward movement.

The nuances of working on a channel strategy

The main disadvantages of channel strategies include some subjectivity in channel construction and the absence of generally accepted breakdown and rebound criteria. To build a channel, you need only 3 extremes on the chart, but each trader chooses different extremes. In addition, the channels adjust quite often, which also affects the trading results.

Despite the absence of generally accepted criteria for a rebound or breakdown of the channel, we can recommend paying attention to the price behavior near the channel border:

• if the channel was broken in one breath, 1-2 candles, then there is a high probability that it is true. But it is still recommended to wait for the channel retest;

• if, after the rebound from the channel border, the price does not go in the right direction, then it is recommended to at least rearrange the deal to breakeven;
• it is recommended to make deals in the direction of the trend on the higher timeframe.

The Forex channel strategy is also of interest because over time it does not lose its efficiency, as happens, for example, with indicator strategies. All that is required for profitable trading is strict adherence to the rules and competent selection of auxiliary instruments. A source:

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From the article you will learn:

Let's first find out what a trading channel is.

This is a price model, in which the change in the currency quote occurs in some trading range over a period of time that we can determine, usually after this corridor is broken.

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Thus, one side of the channel border is a resistance level, the other is a support level. You need to look at the direction of the trend in order to determine the ascending channel, descending or sideways (read -,).

And most importantly, a hundred years ago, I made a book-brochure that I didn’t post - its basis is how to build a channel correctly, if necessary, download it for like:

Download

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It's time to figure out how to build trading channels

For channel trading, Forex provides very convenient opportunities. An ascending channel is built by a trader using a trend line through the last two lowest prices in the last two waves. Next, a parallel line is drawn along the highest price point in the wave, while it should be between the two lower points.

A descending channel is built by a trader using a trend line through the two highest price points, candles, bars. Further, a line is drawn parallel to them, which is built through the lowest point in the wave. In this case, the minimum point must be between the two lower minimums.

Also, you need to understand that there may be confirmed and unconfirmed channels.

Verified channel- this is the one in which the upper, as well as the lower border were the border for the price twice each.

Then they become support and resistance. If the line of support and resistance are based on only one point, then it can be considered unconfirmed.

Channel trading is a commonly used and very attractive strategy for many traders. It is regularly used in practice. This strategy is considered highly profitable with a relatively low risk level.

The trading channel should be traded by dividing it into three zones: the line in the middle of the trading channel and, following the picture, approximately 10% from the support line and the channel resistance line.

You need to trade not in the inner zone of the channel, but only from its borders - the levels of purchases and sales. The direction should be chosen from the nearest border to the opposite one. To apply this strategy, the width of the trading channel must be at least .

A position is entered when the price has reached the sell or buy zone. The entrance is also carried out by .

A protective order should be placed outside the channel at a distance of ten to twenty points or according to your risk management rule, that is, by a percentage of the deposit amount. You need to take profit when the price reaches the border level on the opposite side.

You can also close some part of the profit in the middle of the channel, the other half of the position upon reaching the border on the other side.

Main mistakes when trading in a channel

• The trade is entered inside the channel. The position in this case “catches up” with the price. You need to trade only from the boundaries of the channel, so you need patience to wait until this level is reached.
• at an insufficient distance, this leads to a loss of position with a slight exit of the price beyond the channel lines.
• at the wrong moment. It is recommended to wait until the first counter fractal closes, which is associated with frequent retesting of the channel boundaries.
• Closing the deal too soon. You need to follow discipline or use a partial exit from the trade.
• Closing a position manually. It is better to do this with stop orders and when the price is close to the borders.

Channel trading also works very well with the signals of some indicators, for example, which gives a signal for a reversal, as well as for.

If the stochastic has formed and the price is far from at that moment, such a signal should be ignored. If the signal is displayed when the price has reached the channel border in the 10% zone, then this signal is recognized as true.

Professional traders often use these moments to add to open positions. But beginners timidly skip such a signal to add to the position.

Trading strategy during the breakdown of the channel borders. Also a commonly used trading strategy

Trading at the level of the channel border breakout is a simple opening of a sell position, in case the price breaks through the support zone, or a buy position, in case the resistance zone is broken through. The strategy will be effective in the conditions of a trend in the market, while it is completely ineffective in the state of a flat in Forex.

Opening a position is performed when the channel level is broken at some levels, they must be located at a certain distance, determined by you empirically, from the channel line.

A stop loss order is placed inside the channel. Preferably in the middle of it, of course, this should not contradict your trading strategy and risk management in particular. It can also be located in front of the border of the broken channel.

The breakout of the channel border triggers the following several scenarios for the development of the price movement:

• A strong, abrupt price move in one direction with a lot of trading volume.
• Price movement and retesting of the border of the channel that was broken, such a return to the border. And then, the continuation of the price movement in the direction of breaking through. Thus, the scheme of penetration, rollback, continuation of movement works.
• False channel breakdown. It occurs when the price, which has broken through the support or resistance line, after a short break returns to the movement in the channel.

For beginners in trading, the best option for forex trading through channels is to enter the market after the second test of the broken border. This is the most reliable signal, even considering that there is a possibility of missing a strong move. You shouldn't be upset about this. Opening trading positions on the movement often meet with a false breakout, and this leads to losses.

It is also important to understand that when starting to trade, you need to accept its rules. For example, a buy signal is not reliable if the upper limit of the ascending channel is broken, just as the broken lower limit of the descending channel is not a good enough reason to enter the market.

Therefore, when applying the trading strategy about breaking through the channel, you need to apply the following simple rule. A reliable signal occurs when the lower zone of the ascending channel and the upper zone of the descending channel breaks through. It is important to understand that a breakout of the ascending and descending channels in their direction is also possible, but only if it is confirmed. These can be a breakout of the channel boundaries with a large volume of trade.

Have you ever participated in real races? The Forex channel strategy "Racer" will allow you to win in any exchange trading competition, as it is a two-time winner of trader battles held at one of the foreign forex forums. Therefore, if you are thinking about how to get profit on Forex in the most efficient way, this strategy will easily provide it for you!

Trading in channels using the Forex "Raiser" strategy

So, in our Forex channel strategy, a channel built from Moving Average indicators is used, and the trader receives signals for entering the market at the moment the price exits the flat at the beginning of a new trend. That is, at the most optimal moment. It remains only to catch this signal and make a deal on it! And the profit on Forex will not keep you waiting long. Just below you can download the template of this Forex channel strategy and the indicators used in it. In the meantime, let's continue to consider the rules of this trading system. After installing the template, you will get the following asset chart:

And the conclusion of transactions according to the specified template is carried out in the following way.

How to get profit in Forex using a channel strategy

So, after installing the template, we turn our attention to the quotes chart. As you can see, there is a channel on it, formed from two moving averages, and the yellow moving average crosses the specified channel, first in one direction, then in the other. The trader's task is to catch the moment when the yellow moving crossed the upper or lower border of the channel and make a deal in the right direction. It's done like this:

Making a BUY deal:

We wait until the yellow fast moving crosses the upper border of the channel upwards.
The closing price of the signal candle should be higher than the upper border of the moving channel
After you receive these signals, open a BUY market trade.

Stop-loss is set at the level of the upper border of the MA channel and trailed along this channel as new quote candles appear on the chart until the deal is closed by stop.

Making a SELL deal:

We wait until the yellow fast moving crosses the lower border of the channel down.
The closing price of the signal candle should be below the lower border of the moving channel
After you receive these signals, open a SELL market trade.
Take-profit is not set
Stop-loss is set at the level of the lower border of the MA channel and trailed along this channel as new quote candles appear on the chart until the deal is closed by stop.

As a possible option for exiting trades in this strategy, support/resistance levels are used, which are automatically placed on the quotes chart. That is, when the price reaches the level of resistance or support, you can close the deal on the received profit on Forex or rearrange open position into breakeven.

Channel trading

It is quite easy to get a profit on Forex trading in channels, but it is also easy to lose earned points. Therefore, when trading according to this strategy, strictly follow its rules for entering positions, as well as money management. In trading, use no more than 2% of the deposit size. For trading, choose a horde of the majors of the market or a cross crus with a small spread. As for the timeframe for trading, the forex channel strategy can work on the time interval from M15 to H1.
In any case, the Racer channel forex strategy is an aggregate that can and can earn profit on forex! What we wish you!

It should be remembered that 50% of the result depends on the quality of the broker's trading conditions. Therefore, for real trading, it is better to choose a reliable forex broker from the rating.

You have arrived at the Forex Trading Channels step by step guide page. Having studied this technical analysis tool, you will be able to independently find entry points to the market, places to set Stop Losses, and also learn how to determine the potential of a transaction.

Today we will go through:

• What are the channels?
• Display on the chart;
• Construction rules;
• How to trade forex channels.

By trading channel, we mean a limited price range in which the price moves within a certain period of time.

Click the button"explore" , start using trading channels effectively.

Today we will talk about a very old Forex technical analysis method, using standard trader's tools built into any MT4 terminal. The Forex channel strategy arose when traders noticed such a price property as movement within a certain corridor. This corridor was named Forex channel. Price monitoring revealed properties such as:

1. straightness;
2. The price will rather bounce off the upper or lower border than break it;
3. The presence of support and resistance levels.

Using the data obtained, we created standard trade channels, which are simply and quickly created in the trading terminal window.

• Fibonacci strategy channels;
• equidistant channels;
• linear regression channel;
• standard deviation channel.

Explore »

The price can move in the following directions:

1. Uptrend or bullish trend;
2. Downward or bearish trend;
3. Lateral trend.

The screenshot shows "Uplink".

The exchange rate never changes rapidly and at a time. It takes time to cover a certain distance. When the advantage is on the side of the buyers, the cost currency pair is growing. They cannot buy forever, and the effect of the news release is limited in time. When there is a lull, sellers step in and a correction begins. Having dropped to a certain value, buyers again come to the market, because they consider the current value of the currency attractive for purchase - the rate begins to grow again.

If each subsequent price peak is higher than the previous one, and each subsequent decline is higher than the previous one, the trend line is considered to be ascending. And vice versa, if high and low below the previous values, then the trend is falling. The simplest Forex channel is built on three points. The two points at the bottom of the channel are usually low, the place where the price rebounded from, and high- where did you come. Such a corridor is called equidistant. Due to the difference in the construction of trading corridors, the Forex channel strategy looks different for each trader.

Working with equidistant channels is very simple. As a rule, the Forex price channel itself is not a trading strategy. It is only an integral part of the set of technical analysis tools. Having drawn the price range of the currency rate movement, you have an idea about the presence of a trend. The upper borders act as resistance levels, the lower ones support. When the price breaks through one of the boundaries against the trend, the trend changes to the opposite, or goes sideways.

Click the button to go through the step-by-step guide to "Forex Channels" and master it in a few simple steps Explore »

The disadvantages of not only equidistant, but also other channels are:

1. Frequent false alarms;
2. The reversal occurs before reaching the border of the corridor;
3. The price fluctuates within the range for a long time.

Very similar, but different channels are called upon to neutralize negative factors. Forex trading channel "Linear regression" builds the upper and lower boundaries of extremums. And the Forex price chart divides the straight line in half. Forex channel strategy using these lines has its own characteristics. First of all, you need to pay attention to where the price is relative to the middle line. If it is higher, the trend is definitely growing. When the currency breaks through the middle line and goes to the lower border, this is a warning signal. On the lower timeframe, there has already been a short-term change in trend, a downtrend has formed - you can assume that the price will reach the intended target, the lower border of the channel. From the levels reached, a rebound, a reversal or a breakdown is possible.

Now let's look at how to build a price channel using the standard deviation. This construction method differs from the previous one in that the upper and lower boundaries are not drawn along extremums, but are located in the middle of the price movement range. It is best used in a sideways trend. When the price is exactly in the middle. You can assume with almost 100% probability that the rate will reach either the upper or lower border of the channel repeatedly. You can safely open deals in any of the directions, waiting for the price to return to the desired level. The beauty is that you need to do this many times while the price is inside the corridor. But we do not know when the trend will change, and this is already a significant drawback. Use this way trading is better with a pronounced flat trend.

Click the button to go through the step-by-step guide to "Forex Channels" and master it in a few simple steps Explore »

Another standard Forex channel is Fibonacci. We have heard a lot about Fibonacci levels, but what is the channel trading strategy? By in fact, the channel and levels are the same, only with different values. According to the Italian mathematician, key events for the value of goods take place at these levels. Their meanings:

1. 0,618;
2. 1,618;
3. 2,618.

Due to the low popularity among traders, often the price goes around without paying any attention to them. Although sometimes, literally up to a point, Fibonacci channels act as a key level. We think this is more of a coincidence than a pattern. The trading strategy is the same as other channels. When approaching a resistance level, you must either buy and count on a breakdown, or sell and count on a rebound. It is important to watch the price, waiting for signs of continuation or a change in trend - then you can correctly interpret them.

The channel strategy may be of interest, first of all, to beginners when studying the basic concepts of the Forex market. It is impossible to develop without having an idea about the levels of support and resistance that are formed within the trading range. The rule "Work only with the trend" is based on an understanding of the range within which the currency is moving. It is important to remember about the timeframe. As long as the global uptrend dominates on the daily chart, the price within the correction on the younger time periods can travel distances of hundreds of points. This implies the presence of several channels on the chart - global and auxiliary.

Forex channel strategy is based on two models of price behavior. The course will either break through the support or resistance line, continuing to move in a given direction, or bounce, starting a correction. Here, your raider experience and knowledge come to the fore, which can suggest how the price will behave at the levels reached. Despite the fact that the channels represent an established method of technical analysis of the Forex market, the use of additional tools can improve the quality of opened deals.