A Channel Trading Strategy

Channel trading is not exotic but nevertheless can be profitable. A channel is formed when the price action can be enclosed between two parallel trendlines.

However, currencies rarely stay in a narrow range for long and have a tendency to breakout from a tight range and develop a strong trend in the market. Important economic news releases can act as a trigger for a breakout.

Currencies start trading in narrow ranges before the announcement of important economic news release as well as before the start of an important trading session like the European or the US market session.

You can use this channel breakout trading strategy on 5 minutes, 15 minutes, 30 minutes, 60 minutes and other intraday charts. The best time to trade channel breakouts is on an important economic news release.

Once, you had identified the channel before some important economic news release, wait for the breakout. If it happens on the upper side, enter long with stop loss below the upper channel line and use a trailing stop in case the upward move continues.

And in case of a breakout in the down direction, enter short with a stop loss 10 pips above the lower channel line. Take profit at double the channel range!

You can also enter two entry order, one long and other short 10 pips above and below the two channel lines prior to some major economic news release.

Now, in case of a breakout in the upward direction, long entry order will be triggered. Place stop loss immediately 10 pips below the upper channel line and use a trailing stop in case the upward move continues.

On the other hand, if the breakout is on the down direction, your short entry order will be triggered. Place a stop loss 10 pips above the lower channel line. If the market move in the down direction develops into a major move, use a trailing stop.

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