Targeting promotions is a simple, effective strategy

Channeling Stocks (or Rolling Stocks) can be a very accurate and reliable trading strategy that will give the trader precise entry and exit points.

When a stock repeatedly moves up and down in waves between two parallel lines, it is called a direction or roll. A line is drawn through the high and one through the low. This forms a channel. The upper line is called the resistance line and the lower line is called the support line. Some traders choose to trade within a channel and enter or exit a trade when the price approaches a support or resistance line. Others prefer to trade breakouts, entering or exiting a trade as soon as it breaks out of the channel.

One of the biggest advantages of this strategy is that it gives us clear entry and exit points. Greed and fear are a trader’s worst enemies, but emotions have no place in a system that uses strict buy and sell signals and stop-loss or trailing-stop orders.

There are three types of channels: upstream channel, downstream channel and horizontal channel. An ascending channel is an ascending channel defined by higher highs and higher lows. Descending is a descending channel defined by lower highs and lower lows. And a horizontal channel (also known as a rectangular channel) is defined by horizontal highs and lows.

There are several ways to trade channels:

-Trade in the direction of the channel. Long positions can be opened in ascending channels, pushing the price up until the support line of the channel is broken. Short positions can be entered in the descending channel, exit as soon as the price breaks the resistance line.

  • Trade within the channel. Long positions are entered when the price bounces off the support line and sold close to the resistance line. Shorts are entered when the price bounces off the resistance line and closes close to the support line.

  • Trade channel breakthroughs. This strategy does not provide an exit point. Longs are entered when the price breaks through the resistance line and shorts can be entered when the price breaks through the support line.

Check the availability of channels in different time periods. Many times you can predict when a channel will break by checking other time frames. The channel you are currently trading at one time may be bullish or bearish in a longer time period channel. Choose the appropriate time frames for your type of trading: weekly or monthly charts for long-term trading, daily charts for short-term or swing trading, intraday charts for day trading.

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

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