Hello friends and readers. Today I want to share one very interesting strategy called - Sliding channels.
A little background... This strategy was used back in 2002 on the forex market.
It was noticed that some currency pairs move very clearly in price channels. And since on Forex you can easily open both down and up, it was very convenient to catch price peaks.
Since crypto on Binance is also a kind of currency, some pairs move in the same channels and perform very well within price ranges...
What is the strategy about? And why is it even needed?
It is often very difficult to open a trade because you are not sure you are opening at the very bottom; what if the price goes lower? Price channels help to determine the benchmarks for where to open and where to close the trade.
Building sliding channels is very simple. You choose a time frame of 1 hour or 4 hours, depending on what is more convenient for you to trade and based on the coin. A trend line is drawn through two minima, and between these minima, a maximum is found, and through it, another line is drawn parallel to the first.
On Binance, there is a separate tool for this.
Trading rules:
If the price reaches the lower boundary of the channel, we open a buy order.
If the price reaches the upper boundary, those who trade on spot can either close the trade or, if the movement is very strong and fast, wait a bit longer and place a stop loss closer to the upper boundary.
If you know how to work with futures, you can open a trade down at the upper boundary. Then the potential profit will be greater.
If a new maximum or minimum forms, the price channel is rebuilt, and orders are moved to new boundaries. If you are already in a trade, you can wait for the price to reach the new boundary.
If the price goes beyond the channel boundary and travels a certain distance, it has been observed that then the price will go approximately the same amount again. In forex, this was about 60 pips for the dollar/ruble pair.
Then in this case, a double stop loss was set with a target of 60 pips.
For crypto, these parameters need to be selected individually for each pair.
Do not trade inside the channel. If you haven't entered at the boundary, wait for either a channel change or when the price approaches the boundary again.
As an option, you can partially close when the price hovers near the boundary and doesn’t reach 5-10% of it.
Head and shoulders cancel all signals. - If this figure appears on the chart, I trade according to it. See links below...
Orders can be placed not on the very boundary of the channel but a little higher or lower. This parameter is selected by running statistics on historical data. You simply take a 1-hour or 4-hour chart, print it out, stick it together, build channels, and calculate statistics. If the result satisfies you, you start trading; if not, you change parameters and recalculate.
Example below:
Here is a 4-hour chart, but I trade on 15-minute and 1-hour charts as well, so there are many trades and intermediate channels. A channel is drawn through points 123, and you can see how clearly the price bounces at point 4 and reverses. At point 4, there should be a buy order. And at point 5, a sell order.
The result of such a trade is 110$-88$=22$ from the invested 100$. Quite a good result in 15 days. But if you are interested in trading more actively, you can find coins that move well in the range of 15 minutes or 1 hour. There will be more trades, but you will also need to monitor them more frequently.
Those who have not used this strategy before, especially beginners, I do not urge you to open your entire deposit. Observe, see how the price moves. Build your channels, check everything against history. Calculate statistics...
Share in the comments how it worked out for you or what didn't work out.
Happy New Year to everyone!! Wishing you success and patience!
Continuation of the series of articles from Spekulyanta:
Graphic Analysis. Trading Classics. Part 1
Graphic Analysis. Head and Shoulders. Trading Classics. Part 2
