Inclined Channels in Trading: How to Use Them
Category : Software
For more than 100 years, the tradershave been analyzing the financial assets movement and every year their tools are being expanded and improved. Some elements leave the fix api traders interest because of the changes in the market functioning as a whole, and some are used throughout this time interval. So, classical tools for predicting the future price movement have become a constant in the technical analysis. Sloped channels can be attributed to the list of such tools.
An inclined channel is a graphical tool for assets analyzing to find a “corridor” for the movement of financial asset quotes. There is a phrase that “the market is walking in the corridor.” The inclined channel allows to define the given zone. In simple terms, the inclined channel is the same supportand resistance levels, from which the asset value is repulsed and continues its movement in the opposite direction.
How to build an inclined channel?
To build an inclined channel it is necessary to draw two parallel lines to each other. Classically, it is necessary to stretch the first line through two points, the boiler ones will be support or resistance, and the second line only through one point of the local maximum or minimum, depending on the directed channel. And that’s all. The channel is ready. But the market does not stand still and is constantly developing, which means that the analysis approach is developing. Some fix api tradersare looking for at least three points on the first line and two on the second. This approach is widely used by our Asian colleagues. Personally, I use the classical technique.
How to apply it in trading?
By itself, the inclined channel will not display obvious signals to purchases or sales. But it will allow you to form an understanding of the trend and the current market phase. Thus, if your trading strategy displays signals for sale, and an inclined channel displays upward values, I would think twice before opening a deal. Conversely, if the TS displays sales and quotes are moving in the downlink, then we can boldly open a deal.
In addition, the channel can be used with the help of two methods:
- When clearing: when the quotes reach one of the channel’s borders, the trader sets a buy/sell order with a stop loss level outside the channel boundary. After all, the breakdown will testify for the beginning of a new cycle. This approach is the most popular type of work with the channel on the fix apiforex market.
- In case of breakdown. If the quotes have broken through the upper or lower border of the channel and are fixed above it, then a pending order should be installed at the local maximum or minimum breakdown. Thus, triggering the transaction will be a signal for the beginning of a new cycle and the trend as a whole. The stop loss level here will be much more than the first method, but there is a high probability of opening a trade at the beginning of a new trend.
The principle of the price channel was also adopted by some technical indicators. So the Price Chanel indicator is built on the basis of the minima and maxima of price quotes, thereby forming a channel. The Bollinger Bands indicator (http://metatrader4expertadvisors.com/) is also a certain specification of the channel, the calculation basis ofwhich is the standard price deviation. The principles of the inclined channel are also used in the Ichimoku Cloud indicator.
Undoubtedly, the principle of the inclined channel will not be profitable for those who trade based on the fix api arbitration technique (http://www.forexzzz.com/product/forex-zzz-lock-arbitrage/) or the scalping algorithm. But for other strategies, this will be an excellent auxiliary tool for determining the driving force of the market. I apply this tool when there is no clear wave structure on the chart, and the inclined channel helps me understand which way the quotes are moving.