Price Channel indicator and scalping based on it



Price Channel is another channel indicator belonging to the Envelope family. It was developed by Richard Donchian, who is the author of another channel indicator named after himself. Visually, it resembles classic channel instruments – the central averaging line and the channel boundaries that form resistance and support lines. The only difference is in the formula for their construction.

Price Channel indicator: essence, description, trading strategy

Price Channel lines are dynamic support and resistance levels – price extremes for the time period specified in the settings. The central line of the indicator is the arithmetic mean between its borders. Advantages of Price Channel: does not take into account price noise, does not redraw.

Indicator signals:

  • The price touches the channel borders – it is likely to reverse.
  • A narrowing of the channel indicates a flat and an imminent trend.

Unlike other channel indicators, we are not talking about a breakout strategy using the Price Channel. The indicator draws support and resistance levels in such a way that graphically the price hardly goes beyond its borders. If the price breaks the channel, the indicator immediately draws new extremes. Another difference is that the formula does not use moving averages.

The theory suggests opening deals in the direction of the channel breakout. If the candlestick touches the lower border or closes below it, you need to open a short position. This tactic is suitable for intraday strategies, where a similar trend can actually persist on a small timeframe. But inside the trend, there are local corrections – the price return to the middle of the trend, which we will catch.

Since MT4’s Price Channel is not included in the basic ones, it can be downloaded and added to the terminal via “File / Open Data Directory”. We will use the built-in terminal of the LiteForex broker’s personal account, where this tool is already available.

Conditions for opening a deal:

  • Pair – EUR / USD.
  • Timeframe – М15.
  • Long position – the candlestick touches the lower border. Short position – the candlestick touches the upper border.
  • Closing a trade – the price touches the middle of the channel.

Price Channel-1

At point “1” the price touches the lower border of the channel with a shadow. We open a long position and earn about 10 points on the next candle. A similar situation at points “2 – 4”. Point “5” is a false signal, the trend continued its upward movement.

The strategy is basic. To reduce the number of false signals, you can add Price Action elements and other tools. In case of a false signal, the trade is closed or using a 15-point stop. Or when the second candlestick after the signal one also did not turn out to be a reversal one, but continued the initial movement. In other words, we close the deal when three consecutive candles have the same color.

The absence of a reversal can also be interpreted as a strong price movement. For example. On the rising candlestick, after touching the channel border, a short position was opened. The second candlestick continued its upward movement. If the third candlestick also starts growing, reverse the trade.

If you have any questions, ask in the comments!

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Price Channel

Price Channel is another channel indicator belonging to the Envelope family. It was developed by Richard Donchian, who is the author of another channel indicator named after himself. Visually, it resembles classic channel instruments – the central averaging line and the channel boundaries that form resistance and support lines. The only difference is in the formula for their construction.

Price Channel indicator: essence, description, trading strategy

Price Channel lines are dynamic support and resistance levels – price extremes for the time period specified in the settings. The central line of the indicator is the arithmetic mean between its borders. Advantages of Price Channel: does not take into account price noise, does not redraw.

Indicator signals:

  • The price touches the channel borders – it is likely to reverse.
  • A narrowing of the channel indicates a flat and an imminent trend.

Unlike other channel indicators, we are not talking about a breakout strategy using the Price Channel. The indicator draws support and resistance levels in such a way that graphically the price hardly goes beyond its borders. If the price breaks the channel, the indicator immediately draws new extremes. Another difference is that the formula does not use moving averages.

The theory suggests opening deals in the direction of the channel breakout. If the candlestick touches the lower border or closes below it, you need to open a short position. This tactic is suitable for intraday strategies, where a similar trend can actually persist on a small timeframe. But inside the trend, there are local corrections – the price return to the middle of the trend, which we will catch.

Since MT4’s Price Channel is not included in the basic ones, it can be downloaded and added to the terminal via “File / Open Data Directory”. We will use the built-in terminal of the LiteForex broker’s personal account, where this tool is already available.

Conditions for opening a deal:

  • Pair – EUR / USD.
  • Timeframe – М15.
  • Long position – the candlestick touches the lower border. Short position – the candlestick touches the upper border.
  • Closing a trade – the price touches the middle of the channel.

Price Channel-1

At point “1” the price touches the lower border of the channel with a shadow. We open a long position and earn about 10 points on the next candle. A similar situation at points “2 – 4”. Point “5” is a false signal, the trend continued its upward movement.

The strategy is basic. To reduce the number of false signals, you can add Price Action elements and other tools. In case of a false signal, the trade is closed or using a 15-point stop. Or when the second candlestick after the signal one also did not turn out to be a reversal one, but continued the initial movement. In other words, we close the deal when three consecutive candles have the same color.

The absence of a reversal can also be interpreted as a strong price movement. For example. On the rising candlestick, after touching the channel border, a short position was opened. The second candlestick continued its upward movement. If the third candlestick also starts growing, reverse the trade.

If you have any questions, ask in the comments!

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Price Channel

Price Channel is another channel indicator belonging to the Envelope family. It was developed by Richard Donchian, who is the author of another channel indicator named after himself. Visually, it resembles classic channel instruments – the central averaging line and the channel boundaries that form resistance and support lines. The only difference is in the formula for their construction.

Price Channel indicator: essence, description, trading strategy

Price Channel lines are dynamic support and resistance levels – price extremes for the time period specified in the settings. The central line of the indicator is the arithmetic mean between its borders. Advantages of Price Channel: does not take into account price noise, does not redraw.

Indicator signals:

  • The price touches the channel borders – it is likely to reverse.
  • A narrowing of the channel indicates a flat and an imminent trend.

Unlike other channel indicators, we are not talking about a breakout strategy using the Price Channel. The indicator draws support and resistance levels in such a way that graphically the price hardly goes beyond its borders. If the price breaks the channel, the indicator immediately draws new extremes. Another difference is that the formula does not use moving averages.

The theory suggests opening deals in the direction of the channel breakout. If the candlestick touches the lower border or closes below it, you need to open a short position. This tactic is suitable for intraday strategies, where a similar trend can actually persist on a small timeframe. But inside the trend, there are local corrections – the price return to the middle of the trend, which we will catch.

Since MT4’s Price Channel is not included in the basic ones, it can be downloaded and added to the terminal via “File / Open Data Directory”. We will use the built-in terminal of the LiteForex broker’s personal account, where this tool is already available.

Conditions for opening a deal:

  • Pair – EUR / USD.
  • Timeframe – М15.
  • Long position – the candlestick touches the lower border. Short position – the candlestick touches the upper border.
  • Closing a trade – the price touches the middle of the channel.

Price Channel-1

At point “1” the price touches the lower border of the channel with a shadow. We open a long position and earn about 10 points on the next candle. A similar situation at points “2 – 4”. Point “5” is a false signal, the trend continued its upward movement.

The strategy is basic. To reduce the number of false signals, you can add Price Action elements and other tools. In case of a false signal, the trade is closed or using a 15-point stop. Or when the second candlestick after the signal one also did not turn out to be a reversal one, but continued the initial movement. In other words, we close the deal when three consecutive candles have the same color.

The absence of a reversal can also be interpreted as a strong price movement. For example. On the rising candlestick, after touching the channel border, a short position was opened. The second candlestick continued its upward movement. If the third candlestick also starts growing, reverse the trade.

If you have any questions, ask in the comments!




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