Using Trend Channels to Trade Forex

Using Trend Channels to Trade Forex by Mo4Forex.com

I’ve been learning a lot about trend lines and their significance to my daily trading in Forex. By drawing a proper channel line that the price follows I am able to find possible swing highs and lows telling me I should start to look for possible entries, exits, take profit and stop loss orders. Most trading platforms have a draw channel function, if not, well, I have prepared some examples I’ve recently used myself. Channel lines are drawn on the 3 points, A (high) B (low) C (2nd High) or vice versa in a downward trend. These lines are basically just parallel lines, however, in between there are lines of demarcations at 25% intervals. I’ve noticed that the price action usually fluctuates at these levels more so than at other points, for instance in the second image here, you see the price was on it’s way down from the upper channel and finds support at this middle line. When the price hits the upper or lower channel and can not retrace back to the correlating level, volume has dissapated and/or the trend channel might be broken. I know a few times I’ll draw a trend channel only to have that channel violated with price action that breaks the channel. But, for the most part, I have been able to make quite a few trades that I call, “riding the waves” in between channel lines. 5 to 10 minute scalps that make 10-15 pips (minus spread) 5 or 6 times per pair. This method has its faults I’ve noticed, especially when counter trend trading, as every time I buy into downward market (even on a clear retrace) it is a much “longer haul” than simply trading with the direction of the trend.

To the left is an example of how you can use a Trend Channel and Trend Line to enter a short position in anticipation of the price bouncing off this top trend channel line and reaching the bottom channel within a certain period of time. I simply don’t enter when the price hits this top line, I wait for other conditions to line up together then I get in at a point where I think that trend is over (trend lines help for that). After I get in, I set my stop loss somewhere below the bottom channel and my take profit a little below the upper trend channel line. Depending on the time frame and amount of pips I’m going after, this can take anywhere from 1 minute to days! It all depends, but in this example, I’m looking to make a profit in 15 minutes or less, so I’m trading on a 2 minute chart.

To the right we see how this method actually earned whoever is smart enough to trust it lots of pips in a single day. The last section of this post shows you how this method works on a shorter time frame (all but essential if you want to find the best place to enter or exit). Results will vary based on how patient the trader wants to be. I for one did not ride this short position for too much time, but I wanted to make a note of it because it really is a beautiful thing to behold when it happens. The trend line approach in conjunction with this also helps you find an exit, but in this trade, it was pretty steep price action to be able to draw a viable trend line to the downside here, at least that’s what I felt.

Below is an example of how Trend Channels don’t always work, but probably because of human error. I know for sure this was my own fault because I entered a trade during low volatility hours, and I was counter trend trading, which will always experience more resistance than a position that is with the trend. Even though the price eventually hit the upper channel, it wasn’t before my stops were hit for a loss during a retracement. I was however up 10 pips twice but had my Take Profit at 12 or something, it was a long time ago, but I remember almost turning a profit here.

Example of how trend Channels don’t always work

Another important thing I learned that really does make you money is the use of Trend Channels with Trend Lines. Trend Channel lines can be used with Trend Lines (some use the term Trend Capture Lines), which allow to spot the end of one trend and the begginning of another. Here you see I drew a trend line that on the lows of each bar, and when that line is broken, it’s a good indication that the trend is over; this can work on almost any time frame, including tick charts. Some say more effectively on tick charts, but I’m still trying out both.Trend lines, just like trend channels work on all time frames, but most effectively on longer time frames. It involves drawing a line above or below all the closing prices in a trend. In the example on the left, this is a drilled down version of the channel I was looking at above, we see the price reach the upper channel and at the same time begin to break the trend line. Now, this shouldn’t be an automatic signal to sell, I looked at a few other factors, including volume, time of day, and balance point line. And, if I had just jumped right in, I’d be waiting hours for the price to go in my direction, as light volume couldn’t push the price too far in either direction. If I had been short from that point I’d have to ride out a retracement that might have hit my stops for a loss.

Instead, as we see on the right, I could have waited for the volume to pick up, at which time I’d have to contend with the idea that the price might go back up, to the channel once more, and in truth, there’s nothing that would have prevented it in theory, which is why it’s important to have reasonable stop loss levels when looking to short here. But in reality, what happens is volume picks up more to the sell side and over the next 24 hours the bottom trend line is touched again. Now, when looking for an exit, it would be wise to have a trailing stop based on what ever the situation calls for, and to draw another trend line in the opposite direction, when that line is broken, it might be a good place to sell, especially if it is near the bottom channel. It’s all a matter of how patient I want to be, am I going to freak out every time the trend line is broken for a minute or two, or will I go by what I see and trust the trend? I put in that little comment, this isn’t magic, to remind myself that this should be common sense, the trend is my friend, trend channels help find the trend, trend lines help pinpoint where to find entries and when to exit.

Forex Killer Showing Promising Results (So Far)

New Forex Killer Review (mo4Forex.com) After a month of using Forex Killer I’ve concluded that it does actually make me pips, but the losers are unfortunately outweighing the winners in terms of pips lost vs gained. I will enter trades looking for a 30-50 pip profit (not including the spread), and set an equal stop loss (or a stop loss near a point of resistance) So, while my winning trades netted over 5800, my losers accounted for 3700 in losses. Hardly a killing. In fact I feel a little roughed up myself, but alas, I have seen the err of my ways. Instead of just blindly trusting Forex Killer, you really need to use your brain and do your own analysis on the pair. I know for a fact that news spikes didn’t affect my positions opened with help from Forex Killer’s signals. Also, I used smaller lots for more of the winners and there were some larger lot trades with more of the losers. I deduced that Forex Killer entered me into losing trades because I read the signal near the end of a trend, which still indicated a strong buy or sell signal, but was soon to retrace or reverse, and with the stops I had set for many of them 30, 40 or 50 depending on the pair and situation, I would have a $500 losing trade versus a $100-200 winning trade. So even though I had a 3:1 success rate, the pips gained/lost ratio is much tighter. But, that alone should not turn me, or you, off to this software, my trading method just needs to be tweaked. I thought it would be useful to bring up and see if anyone else had a similar account of trading with Forex Killer.

In total, I have made 48 winning trades and 16 losing trades with Forex Killer. Now, demo conditions are not indicitive of what live conditions might be like, so keep this in mind. Also, note that these results will be different for everybody, there’s just no possible way 2 people can enter the same trade time and time again, so, results will vary. My Detail Statement graph reflects my trading all month, and about mid way I started to use Forex Killer, so you can see how much my trading improved. To repeat, that graph has my own manual trades based on whatever I thought was a good trade, often times a loser for me, on this demo account at least. The graph does speak for itself though; This was not a hypothetical backtest, these were real trades made on a demo account, but real trades noneheless, and for my losses to be wiped out and to see a $3000 gain thanks to Forex Killer’s advice really convinced me to keep trying at it. Even though the often tedious task of entering in one price at a time takes its toll, the signals have proven to be quite accurate and on more pairs than originally suggested by the software developers.

It seems trading GBP/USD was the biggest loser for me, short and long trades were about even in terms of winners/losers. EUR/USD was the second worse and USD/CHF came in third in terms of losers. But like I said, winners outweighed losers 3:1 exactly.

Now, I’m trying out some more trades today and so far things aren’t looking good, 4 losers at once right now and will probably hit their stops. Actually I am down $800 as I type this to you on Forex Killer signals, so things don’t always work, of course.

Addendum— 3 hours later
I was wrong about not trusting these signals, and my least favorite pair earned me $1200 in profits, 120+ pips on two seperate trades, and also another winner in USDCHF and EURUSD.  So all of those trades I thought were about to be losers are now winners, all closed except the one big trade on GBP/USD, I set a 25 point trailing stop loss and am 10 pips away from my target!

Forex Broker Reviews and Comparisons

Hello there everyone, found a few sites that will help you find a Forex Broker that’s right for you. Even if you have a broker already, you can use these sites to review your current one or find a better one. Personally, I think I might try out a couple of MT4 (MetaTrader4) compatable brokers from these lists by opening up mini accounts for $250 or less and test out some indicators that I want to try live, but don’t have the nerve (or stomach) to try with big lots. I don’t see anything too risky about this new approach, the initial investments I can easily part with if the markets don’t go my way. Let me know if this is too foolhearty, even if I trade mini lots. just know testing out these expert advisers out, they will be 3:1 win to loss, and losses always smaller than gains, historically. I’m interested in seeing what the spreads will be like, alot of these brokers keep that under wraps unless you ask. Read more

Forex Programs and Products List

I felt very inspired the other day when I ran across all of these lists for brokers and indicators, and felt my blog was lacking in that department.  So, I put together a list based on ForexBrokerComparison’s list of Forex Alerts, Indicators, Ebooks, and other Software.

Some of these I will earn a slight comission on, but since I am not endorsing or promoting them through reviews, I am not biased.  I am just offering plain hard facts as presented by these programs, price, reported pips per month earnings, etc.  I’ve noticed that most “Ebook” strategies are $97 one time fee.  What the heck is with a $97, why not $99 or flat $100.  I suppose the significance of the $97 reflects an amount that’s universal to most online marketers at which they believe they will attract the most customers and maximize profits.  Most of the ebook systems are this price, certain indicators are cheaper, but are a monthly expense for you.  You need to be the judge on what is going to earn you the most for the least amount of effort/money.  I’m not saying you shouldn’t put an effort into your Forex Trading, I do believe it is wise however to not waste hours trying out systems during which time you can be dedicating to things that make you money, or other trivial things like your family and friends…

Ok, even talk, please enjoy this list, and keep in mind its a work in progress.  Some day, I envision it being 1000 programs deep, because, as you know, there are 1000’s of Forex Signal Providers, Forex Ebooks and Lessons, Forex Mentors, Forex Indicators, Forex Expert Advisers and other Forex related software on the market… they ALL can’t be profitable, and they all deserve to be looked at with a magnifying glass.  Also remember I don’t endorse any of these programs even though I may have tried them and still use them (like Forex Killer), this is just an informative list for your own educational benefit.

Please comment below in this post about any errors and omissions to the list, because pages on my blog can not accept comments.  Click Here To Visit The Forex Programs and Products List.

Forex Broker Reviews

Found another great site that Reviews Forex Brokers of all types. The makers of this site really did their homework with collecting info on all of these Forex Brokers. The site is set up with some sort of content management script that allows you to search for Forex brokers that accept E-Gold, Forex Brokers that Use MetaTrader4 as a platform, ECN Forex Brokers, and gives commentary on the pros and cons advantages and disadvantages to every Forex Broker in their system. This is not in list format with comparisons side by side, so you’ll have to do your own digging into this site to compare and contrast, if you do need side by side comparisons I suggest you try out Forex Broker Comparisons .com.  But if it’s more in depth information and details, check out EARN FOREX, whom I don’t believe is too biased, although some brokers they review do offer affiliate programs, which I’ll go into later in this post, the info is very straightforward, hard to bend the truth with such things like Operating Since or Max Leverage.

Earn Forex also has great Forex informational material throught many sections, including a very informative “FOREX FOR DUMMIES” section, no relation to the book. They go over Forex Basics including Fundamental Analysis, Money Management, Technical Analysis, Psychology and finding the right broker. They also have some really useful tools to help you trade without firing up your trading platform including a Fibonacci level calculator, just enter the swing high and swing low, and you get possible levels the currency pair might move to; a pip value calculator if you want to know a price of a single pip for any Forex traded currency. A pivot points calculator helps you find pivot points in four different systems which are Floor Pivot Points, Woodie’s Pivot Points, Camarilla Pivot Points, DeMark’s Pivot Points; the significance of each is explained on their site. Last but not least, they offer quite a collection of MT4 Expert Advisers and Indicators for you to download; now I’m not sure the legality of this, I’ve tried to look to see if it is alright to repost Indicators and EA’s on my blog here but found no answer (if you know please comment back). At any rate, they explain in pretty good detail what each Expert Adviser and Indicator does/means/ tells you about the Forex Market.

BUT, they go on to excxlusively endorse Forex Brokers to beginners that I know all have affiliate programs and in turn, Earn Forex “earns” anywhere from .1 to 1 lot per trade you make (not exactly sure how much. but they get a cut). So, there’s alot of earning going on, but I do not see any innaccuracies in their info, they simply recommend them for beginners. I still like Earn Forex as a great resource for basic facts about Forex Brokers, which ones offer what, etc. If you have a need to find out some really good information on brokers check out EARN FOREX TODAY!

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