We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
GBP/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bullish
Gold
Bullish
Oil - US Crude
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Bitcoin
Mixed
More View more
Real Time News
  • US Dollar Forecast: USD/MYR Reversal as USD/PHP Tests 2013 Support #USD $USDMYR $USDPHP - https://www.dailyfx.com/forex/technical/article/special_report/2019/10/18/US-Dollar-Forecast-USDMYR-Reversal-as-USDPHP-Tests-2013-Support.html?CHID=9&QPID=917702 https://t.co/VfFPJhPX31
  • Negative yielding government bonds – What are they telling us? Find out from @nickcawley1 here: https://t.co/F6JuhmrvPT https://t.co/aqWMzoZRrk
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 95.68%, while traders in France 40 are at opposite extremes with 80.94%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/CFFN6tgMXb
  • #GBPUSD Testing Five-Year Resistance: Breakout Ahead? https://www.dailyfx.com/forex/technical/home/analysis/gbp-usd/2019/10/18/GBPUSD-Testing-Five-Year-Resistance-Breakout-Ahead.html
  • Forex Update: As of 04:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.42% 🇦🇺AUD: 0.12% 🇯🇵JPY: 0.10% 🇪🇺EUR: 0.03% 🇨🇦CAD: 0.00% 🇬🇧GBP: -0.31% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/i1K0L7cDfA
  • Indices Update: As of 04:00, these are your best and worst performers based on the London trading schedule: Wall Street: -0.09% US 500: -0.13% France 40: -0.31% Germany 30: -0.40% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/ly8aOm0jV8
  • Have you joined @DailyFX @facebook group yet? Discuss your #forex strategies and brush up on your skills with us here: https://t.co/jtY1G7g8yx https://t.co/taFcP1Ge44
  • RT @markets: Reserve Bank watchers consider the options for Australian QE and how it would impact markets https://t.co/9gYZgZXeE5
  • The $USD may extend its climb versus the Indian Rupee, but can it overturn weakness against the Singapore Dollar? $USDIDR and $USDPHP attempt breaking above resistance once more. Get your market update from @ddubrovskyFX here: https://t.co/bCb8Ddcsa5 https://t.co/39mmYjC8Tb
  • What should we expect through the final trading session of the week? I made a video on it: '$EURUSD Faces Its Own #TradeWar, Mind Your #Brexit Risk and China 3Q GDP' https://www.dailyfx.com/forex/video/daily_news_report/2019/10/18/EURUSD-Faces-Its-Own-Trade-War-Mind-Your-Brexit-Risk-and-China-3Q-GDP.html?utm_source=Twitter&utm_medium=Kicklighter&utm_campaign=twr
Manage Stops Like a Professional: Price Channels

Manage Stops Like a Professional: Price Channels

2012-06-08 13:07:00
Walker England, Trading Instructor,
Share:

When placing a trade in the market, professional traders always include a plan for managing their risk. One traditional method for setting risk levels is through the use of technical indicators. In previous articles we discussed using ATR and the PSAR indicator exactly for this purpose. Today we will examine another method of trailing stops using a custom pricing channel.

DNC (Donchian Channels) can be used to establish initial and trailing stop levels on a trade. The indicator is designed to display the current high and low for a specified number of periods. Typically a setting of 55 or 20 periods is used for this purpose. Traders that prefer wider stops should opt for a higher DNC setting while, lower settings offer tighter stop entries.

Manage Stops Like a Professional: Price Channels

The Chart below depicts the EURJPY downtrend developing from the March 2nd high at 111.42. Since this point we have entered three trades using multiple strategies. Regardless of our entry mechanism, one fact remains the same. We need to manage risk! Primary stops can use the 55 period high depicted with pricing channels as our first point to place our original stop. This level is important, if a trend begins making higher highs in a down trend we would want to exit our position as quickly as possible.

Pricing channels can also be used to lock in profit as a trend develops. As lower highs are made, our top channel will move lower as well in accordance to the new 55 period high. Traders can use this trailing component by manually update their stop to the current reading of the DNC indicator. Below we can see the upper channel residing at 102.86 on the EURJPY 8HR chart. From our initial entry, this would allow our primary trade on the EURJPY placed at 108.09 on April 4th lock in profit of 523 pips. This process can continue until price touches our top pricing channel or an established limit is taken.

Manage Stops Like a Professional: Price Channels

Next: How to Read Risk 'OFF' or Risk 'ON' Sentiment (14 of 50)

Previous: What You Need To Know About Your Trade Position Size Strategy

---Written by Walker England, Trading Instructor

To contact Walker, email WEngland@DailyFX.com . Follow me on Twitter at @WEnglandFX.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.