A channel means price moves between the resistance and the support line. Channel trading is a strategy that buys at the bottom and sells at the top of the channel. This strategy works well when the exchange rate tends to be strong in the narrow box market without showing a long transverse trend.
When major economic news is announced in the market, the channel market tends to convert into the trend market. Therefore, traders should be interested in major economic indicators and watch the market closely. The channel forms before the major U.S. economic indicators are recited. When the price is moving at the top of the channel, it is likely to breakthrough.
Draw a trend line, then draw a line parallel to the trend line when the channel is confirmed. If the channel is clear, in most cases, the price moves within two channel lines. Next, check which side of the channel range (upper or lower) the price is located. If the price close to the top of the channel, you can expect an upward breakthrough and a downward breakthrough if it is at the bottom. These strategies may be beneficial before releasing major economic indicators or before the opening of major financial markets.
1. Figure out the channel of the currency pair through the daily chart that moves in a narrow range!
2. When a currency pair breaks through the top of the channel, place a buying order!
3. Place a stop-loss order just below the top of the channel!
4. If the exchange rate proceeds in a profit direction as expected, use the trailing stop!