Identify Forex Trading Channels

To successfully employ strategies such as range trading Forex currencies it is necessary to identify Forex trading channels. The trading channel of a Forex pair is the distance on a Forex chart between support and resistance levels. A Forex pair will trade within this channel until it breaks out to the top or bottom side. Traders seek to identify Forex trading channels and then buy when the price of a currency is near the bottom and sell when it is near the top. Likewise a trader will short a currency when it is near the bottom of the trading channel and exit the trade when the currency rises to the top of the channel. When a trader seeks to identify Forex trading channels he or she also looks to see if the established channel is flat or if it moves up or down the trading chart over time.

How and Where Do You Find Forex Trading Channels?

The first piece of wisdom regarding Forex trading channels is that they do not always exist. The second is that you may need to investigate many Forex trading pairs in order to identify Forex trading channels. Many traders subscribe to alert services. This makes it easier to find good trading prospects. Then the issue remains to identify Forex trading channels with the potential for recurring profits. An established Forex trading channel allows a trader to buy and sell several times before a breakout occurs. There are times, in fact, when a breakout simply results in a new trading channel at a higher, lower, ascending, or descending price range of Forex currency rates.

Identify Forex Trading Channels

When a trading channel has been established for a long time it is clear from a look at the price chart. However, a very long term trading channel may have a lot of volatility within its trading range. In this case, to identify Forex trading channels is a matter finding the forest among all of the trees. In can be useful in this regard to look at longer and longer time lines in order to see established price patterns. Successful traders do not expect to see a sine wave pattern like on an oscilloscope but rather a set of price patterns within another set of price patterns. By mentally subtracting the variability of very short term market events a trader is often able to see an underlying fluctuation between highs and lows and identify Forex trading channels suitable for profits.

More than One Way to Skin a Cat

Many traders engage in technical trading, such as trading Forex with candlesticks. However, when they identify Forex trading channels, they are both able to profit from trading the channel directly and using this information as a fundamental telling them at which point a trend will turn. In technical trading, traders watch for technical cues. Knowing the likely top and bottom ranges of a trading channel gives channel traders an advantage over purely technical traders and an opening for enhanced trading profits.