A Channel Trading Strategy

Channels are formed often in the currency market. A channel is formed when support and resistance are horizontal and the range is narrow. But it is very difficult for these currencies to stay bound between a narrow range. Sooner rather than later, these currencies break out of these narrow channels. Most of these breakouts occur on some important economic news release.

Currencies start trading in narrow ranges before the announcement of important economic news release as well as before the start of an important trading session like the European or the US market session. You can use this channel breakout trading strategy on 5 minutes, 15 minutes, 30 minutes, 60 minutes and other intraday charts. The best time to trade channel breakouts is on an important economic news release.

When the economic news release is made, price action will breakout in either the up or down direction. In case of a breakout in the up direction, enter long. Place the stop loss 10 pips below the upper channel line. In case, the breakout takes place in the down direction, enter a short trade with stop loss above the lower channel line and use a trailing stop if the downward move continues.

You can also enter two entry order, one long and other short 10 pips above and below the two channel lines prior to some major economic news release. If the breakout takes place in the upper direction, the entry order to go long will be triggered. Immediately place a stop loss immediately 10 pips below the upper channel line and take profit at double the channel range or use a trailing stop if it becomes an extensive upper move.

Similarly, if the breakout takes place in the down direction, entry order to go short will be triggered. Immediately place a stop loss 10 pips above the lower channel line and take profit at double the channel range or use trailing stop in case it develops into a major down move. Try these Forex Signals by two top gun traders in a friendly competition. Learn this powerful Fibonacci Retracement method FREE that pulls 500+ pips per trade.

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