Michael 1.

Parsons

2. A channel l ine is drawn off a series of highs or a series of

lows.
3. The channel line to the right is referred to as an inside
channel line and the channel l ine to the left is referred to as
the outside channel l ine
4. Channel l ines behave as a fence and direct price in a
particular direction whether this is up, down, or in the case of
a trading range, sideways.
5. If either channel li ne is broken, than open positions would
be closed.
6. There are five methods ofentry and they include;
conservative, aggressive, inside, rebound, and trend.

As a reminder, a key component of Channel Surfing is exiting whenever

either channel line is broken. Any open position would be closed or exited
from even if it happens to be the outside channel l ine that was exceeded.
This exit rule would apply to all styles oftrading no matter how aggressive or
conservative the approach may be. Exits can be set up by placing orders just
outside the existing channel lines so that an open position would be closed if
either is reached. When one order is fil led then the remaining order would
then be canceled.
In the case of an aggressive trader, an entry can be made when an outside
channel l ine is broken as long as the situation implies that a reversal is
imminent and certain requirements are met first. A passively aggressive
trader would enter upon the break of the inside channel li ne and this is
known as an inside entry. In contrast, a conservative trader would wait
until price bars actually close beyond the inside channel line before
entering. An even more conservative method is the rebound entry which
is signaled by the break of a smaller secondary channel. Finally, a trend
entry would be made after a trend has established itself and within one
third of the trend range, closest to the inside channel.
Before continuing, it would be good to clarify a few aspects related to
developing your own style of trading. Just as a surfer can choose from
among a variety of surfboards, beaches and waves, you too have a
variety ofchoices when it comes to the markets and time frames that can
be traded. The choice you make can make the difference between a
profitable trade and a losing one despite the strength of any trading
method you possess.
In real li fe no one is going to buy an Enron when it is clear it's headed
for bankruptcy, so don't trade a dead horse. Slippage will create problems
ifyou
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