Trading channels – the hard way, and the easy way

A price that’s bouncing neatly between two levels can be a real gift to traders. Just buy at the bottom of the range… and sell at the top of the range. Easy money!

Right?

Well, there are certainly great opportunities to make money this way… but turning this simple profit trick into a really successful trading method takes something extra.

And – please keep reading to the end of the email, because I’ve some exciting news about a surprisingly simple way to make this work for you with a 77% strike rate.

But first, here’s what ‘looks like’ a perfect channel set-up forming on the EURUSD chart yesterday lunchtime…

And watch how I’ve made a real meal of this trading opportunity…

As you can see, the price has been bouncing around in a downward channel for a few weeks. And, importantly, is right at the top of that channel – is this our moment to take advantage of a down-swing?

It gives us a great picture of support and resistance – as the price moves up, sellers come in and halt its progress; as the price moves down, buyers come into the market and give it a boost.

These channels can be downward, upward or horizontal.

Trading channels – the hard way, and the easy way

What we want is to be able to draw a straight line between its highs, and another one between its lows.

So, how do we play this?

Should we quickly jump in and sell EURUSD because we’re at the top of that channel?

Sure, we could do that – but I’d really like more security than that when I’m risking my money on the markets. I want to see that move happening. I could add another indicator, but instead I’m going to zoom in and look for price action at the level…

Here’s a close-up that bounce at resistance shown on a 30-minute chart.

Trading channels – the hard way, and the easy way

What I want to see here is a pullback to the resistance level, and then a good bearish candle to tell me that a downward move is underway…

So I’ll watch… and wait…

It takes a few hours, but here we can see a nice pullback to the level of resistance and – right on that level, a bearish candle forms. This looks like a good moment to get into our trade…

Trading channels – the hard way, and the easy way

So, there we have our set-up. But I’ve forgotten something important – finding a nice set-up on charts is fairly simple. What’s trickier is working out the profit target and stop levels that will give you a good enough chance of winning, without taking too big a risk.

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