Channel Trading

A Simple Forex Trading Strategy for Consistent

Profits
Table Of Contents

Introduction
Chapter 1 – What Is a Pricing Channel?
Chapter 2 –Types of Pricing Channels?
Chapter 3 – How to Use a Pricing Channel Step-by-Step
Chapter 4 – What to Avoid
Chapter 5 – Final Comments
Conclusion
Introduction
I want to thank you very much and congratulate you for downloading the book, Channel
Trading–A Simple Forex Trading Strategy for Consistent Profits .
While there are numerous complex trading strategies, there are also excellent basic
trading strategies that are easy to use and offer high-probability opportunities for profit.
One of the favorites among technical traders is trading price channels. This is where the
price of a security oscillates between an upper and lower price level, which represent
the resistance and support levels in the market.
In this book, you’ll learn what price channels are, and you’ll be taken—step-by-step—
how to execute a channel trading strategy to help you make consistent profits as a Forex
trader.
Thanks again for downloading this book, I hope you enjoy it!
Legal

© Copyright 2014 Zantrio, LLC. All rights reserved.

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Risk Disclaimer
Trading in any financial market involves substantial risk of loss and is not suitable for
all investors. Any style of trading in any market condition is extremely risky and can
result in substantial financial losses in a very short period of time. There is
considerable exposure to risk in any transaction including but not limited to, the
potential for changing political and/or economic conditions that may substantially affect
the price or liquidity of a trade.
Trading is a challenging and potentially profitable opportunity for those who are
educated and experienced in trading. Before deciding to participate in the markets, you
should carefully consider your objectives, level of experience and risk appetite. Most
importantly, do NOT invest money you cannot afford to lose. Objective, experience, risk
of loss, leverage, creditworthiness, limited regulatory protection, market volatility that
may substantially affect the price or liquidity of a trade, communication failure, etc.
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Chapter 1 - What Is a Pricing Channel?
It is quite easy to recognize a pricing channel on a chart. To do this, identify a pattern
similar to the one below, which shows trading of EURUSD. As you will see, the price
is generally falling, but it moves back and forward between two limits. These limits are
not fixed, but fall over time to define the channel. Simply connect the highs to define the
upper channel limit – the resistance line – and the lower channel limit – or the support
line. These two lines should run roughly in parallel if a true pricing channel has formed.

The lower support level is where traders are likely to step into the market to start
buying, while the upper resistance level is where they will look to sell to take profits.
Chapter 2 – Types of Pricing Channels

In the EURUSD example above, the levels are falling, creating a descending channel,
but it is also possible for the levels to rise over time, creating an ascending channel. Of
course, the levels can be horizontal as well when the security is trading sideways in the
market. An example of this type of pricing channel is shown below.

Here, USDCAD moves into a horizontal pricing channel around 22 April and continues
to trade in the channel through to 30 April July. Note that the timeframe for this pricing
channel is over days, not months as in the previous example. Pricing channels can form
over both short and long periods, so it is a good idea to look for them at various
different time resolutions.
Chapter 3 – How to Use a Pricing Channel Step-by-Step
Once you have identified a pricing channel, trading the channel is relatively
straightforward. It is very similar to trading a range, since the support and resistance
lines are a trigger for trading:
As the price approaches the upper resistance line, the expectation is that the
price will then start to fall – this is the point to sell to take advantage of the
anticipated downturn.

As the price drops further and starts to test the support line, the expectation
is that the price will begin to rise again – at which point, this is a buying
opportunity to follow the subsequent upwards turn.

When the price is between the two levels, traders generally do not enter or
exit the market, which is the same approach that is used with any support
and resistance strategy – which channel trading is.

Let’s take a
look at this using our previous example. As can be seen from the chart below, the area
circled in red is a selling opportunity.

Once one of these selling opportunities occur, you can take advantage of this by doing
the following:
1. Enter the market by selling EURUSD. You now have an open position.

2. At the same time, place a stop above the level of resistance. This will make
sure that you exit the position quickly if the price continues to rise –
breaking through resistance and exiting the channel.

3. Place a limit order at the support level – this is the point at which you
expect the price to bottom out and start to rise again. When the limit order is
triggered, you have locked in your profits.
The orders you need to place are shown graphically on the chart below.

At this point, wait for the price to rise to the upper resistance level again, at which point
there will be another selling opportunity. If the price continues to oscillate within the
descending channel for an extended period of time, you will have multiple selling
opportunities – each of which can lead to a profit.
On the other hand, with an ascending channel, the trading plan is reversed. The
opportunities arise at the lower support line instead of at the upper resistance line. In
this case, you should buy at the lower support line, making sure that you have a sell
order in below the price so that you will exit quickly in case the price continues to drop.
The time to exit your position in this case is when the price hits the upper resistance
line.
Chapter 4 - What To Avoid

As with any trading plan, you should always have an exit strategy in place when you are
trading a channel. Never forget to put in appropriate stop orders to exit your position
quickly if the price moves in the wrong direction. It is better to take a small loss than to
hope that an unexpected price movement will reverse itself – prices don’t trade in a
channel forever. Also, don’t get greedy – take your profits when the price hits the target
resistance or support level.
Chapter 5 – Final Comments

Trading pricing channels is a relatively simple and profitable trading strategy. It is well-
suited for novice traders because the channel patterns are easy to recognize, and the
trading plan is also straightforward. At the same time, it delivers high-probability
opportunities for more experienced traders, making it an invaluable tool in their overall
trading strategy.
However, as with any trading approach, channel trading does not offer guaranteed
profits. Traders need to take the appropriate precautions to minimize any losses and
must also exercise trading discipline – they need patience to confirm that the channel
has emerged, and need to stick to their trading plan once they have entered the market.
Conclusion

Thank you again for downloading this book!

You should now have the knowledge you need to execute a channel trading strategy.
The next step is to take action!
Finally, if you enjoyed this book, please take the time to share your thoughts and post a
review on Amazon. It’d be greatly appreciated!
Thank you and good luck!

Bonus: Download the Free Trading Toolkit

Get instant access to free cheatsheets, workbooks and guides to help you become a
profitable trader or investor.
As a special thanks for downloading this book, we've put together a toolkit of exclusive
resources, including…
- Our exclusive ebook: How to Protect Your Trading Profits
- Downloadable cheatsheets for proven option trading strategies
- Our step-by-step guide for using a demo trading account to maximize your
profits
- Plus, brand-new ebooks, downloads, workbooks, cheatsheets, videos and
more each month
Click to Download the Free Trading Toolkit
or visit: www.zantrio.com/kindle