Channel and breakouts

Trading Discussion
1

Hi everybody!

It’s said that chart patterns has the most probability of win, and this seems be correct. Among all the chart patterns, the channel is the most popular and it’s the most recurrent in the practice. And it’s amazing how the price respect the support and resistance.

So, this perspective seems be too much beautiful and too much profitable. But in the practice occurs in problem…

When you identify a channel, it’s probably that you already are seeing 50, 60, 70, 80, 90 or until even 100% of the channel, but you don’t know this! You don’t know when the channel will go finished… So that probability of win 60, 70, or until even 80% of the trades is not true, because the channel will not continue infinitely, the price will break the resistance or the support. And the probability of you open a position (opposite at breakout’s direction) in the breakout is greater than you think!

Look all these positions, they are trades in channels… The buyings were given in supports and the sellings in resistances… And look the numbers of positions with loss…

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And now, what I should do? What’s wrong? Why the channels are not profitable for me???

……………

So, second question about the same topic: What should I make for try minimize the loss? When the price advance in the same direction of my position, I always advance the SL for entry position. I don’t accept lose anymore. So, when the price go in the opposite direction of my position, should I, in this case, advance the TP for the entry position and await the price hit the TP and exit of the trade without loss? Humm?

This is an approach…

But, another approach is the following… To keep an opened position for more than 1 day cost money, cost swap, and the swap, practically, is the “same” price of the spread/commission. This means that keep an opened position for more than 1 day means close the opened position, pay the swap (= commission/spread) and so reopen the closed position. Do you understand? So, now I ask for you: If you are trading channels, support and resistances and you see price breaking the support or the resistance (but you don’t know if the breakout is true or false, it’s impossible to know), would you open a position in the breakout? Probably no, because the probability of you lose money that is too much big. So, if you are trading channels, supports and resistances, why keep a lose opened position and pay the swap if you would not open a position in same conditions???

Do you understand the point in question?? Make sense, is it not true!?!?

…

EDIT: PS: Third question, should I keep these positions opened in weekends? Or should I close all??

2

Intraday Forex Charts Update – June 3, 2016

Pippinainteasy’s blog is almost exclusively about trading channels. If have not been following him I’d recommend that’s a good place to start.

Moving TP so B/E: I don’t recommend this (although its something I’ve done in the past) because essentially you are admitting to yourself that your original analysis was wrong in which case it is probably better to just manually close the position (or hedge).
OR, you just need the balls to let your trade to ride through the waves.

Keeping positions open for multiple days: I guess it depends on what time frame you based your original analysis on. If you are drawing channels on a weekly chart then its pretty much a given you’ll be holding that position open for a very long time. However, if you work off the 1hr or 4hr then I’d advice you reevaluate your position in those intervals to see if they are still valid.

I personally don’t leave position open over the weekend. I use this time to look at the bigger trends, evaluate my predictions throughout the week, and look forward to the coming week for possible trades.

3

If your looking for a break out of the channel, then try a OCO with a fixed Stop Loss and a wide Target Point. Next at the end of the day take any profit that is there. With the OCO you can wait and let the market jump either way (buy or sell). One Cancels the Other is the name of this choice.

4

Your statement “to keep an opened position for more than 1 day cost money, cost swap…” isn’t always correct. Depending on the pair you are trading you can gain on the swap

5

I’ve little experience with swap. Is it like this ?

For usdjpy, I usually lose money on cost swap.

For audjpy , I gain a little in the cost swap.

Think is due to the country’s interest rate? Is this what you call a carry trade ?

6

That’s right. How much you gain or pay out varies depending in the relative interest rates of each currency.

7

Thanks for confirming my thoughts on this Eddie :slight_smile: .