Channeling of actions: a simple and effective strategy

Channeling stocks (or rolling stocks) can be a very accurate and reliable trading strategy that will provide the trader with exact entry and exit points.

When a stock repeatedly moves up and down in waves between two parallel lines, it is said to be channeling or rolling. A line is drawn through the highs and another through the lows. This forms the channel. The upper line is known as the resistance line and the lower line is known as the support line. Some traders choose to trade within the channel and will enter or exit the trade when the price approaches the support or resistance line. Others prefer to trade breakouts, entering or exiting the trade, once the channel is exited.

One of the biggest benefits of this strategy is that it gives us precise entry and exit points. Greed and fear are a trader’s worst enemies, but emotions have no place in a system where employees strictly buy and sell signals, along with stop loss or stop tracking orders.

These are the three types of channels: the ascending channel, the descending channel, and the horizontal channel. The ascending channel is an ascending channel that is identified by higher highs and lows. The decline is a descending channel that is identified by lower highs and lows. And, the horizontal channel (also known as a rectangular channel), is identified by horizontal ups and downs.

There are several ways to exchange channels:

-Trade in the direction of the channel. Long positions can be entered in ascending channels, increasing the price until the support line of the channel is broken. Short positions can be entered in the descending channel, exiting, once the price has crossed the resistance line.

-Trade within the channel. Long positions are entered when the price bounces off the support line and sells near the resistance line. Shorts are entered when the price bounces off the resistance line and is covered near the support line.

-Irruptions of commercial channels. This strategy does not provide an exit point. Longs are entered when the price breaks the resistance line and shorts can be entered when the price breaks the support line.

Look for channels in different time periods. Many times you can predict when a channel will break by checking other time frames. The channel that is currently trading in a period of time can be a advance or a decline within a channel of a longer period of time. Choose the appropriate time frame for your particular type of trading: weekly or monthly charts for long-term trades, daily charts for short-term or swing trades, intraday charts for daily trades.

Channel trading is a very simple yet effective strategy that works well for both beginners and professional traders. As you should, with any new strategy, paper trading, before adding channel trading to your trading toolbox.