News & Analysis at your fingertips.

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.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bullish
Oil - US Crude
Bullish
Wall Street
Mixed
Gold
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
GBP/USD
Bullish
USD/JPY
Bearish
More View more
Real Time News
  • A “PIP” – which stands for Point in Percentage - is the unit of measure used by forex traders to define the smallest change in value between two currencies. Learn how to understand pips in forex here: https://t.co/782gHedGTW https://t.co/i6fB1PIQbx
  • #Crudeoil prices could reverse lower as the #OPEC Monthly Oil Market Report (MOMR) forecasts fading global demand and oversupply concerns. Get your #commodities update from @DanielGMoss here: https://t.co/G02ajeLPqZ https://t.co/THuauT4XQ9
  • The outlook for the $EURUSD pair has worsened after its failure to move back to the high just above 1.20 touched on September 1 despite the #ECB’s decision earlier this month not to talk down the Euro. Get your #currencies update from @MartinSEssex here: https://t.co/kDCHxHgGlU https://t.co/Li4jHqaNdC
  • #USDollar Outlook Bearish on Mnuchin & Powell Testimonies, Key US Data ⬇️ https://www.dailyfx.com/forex/fundamental/forecast/weekly/usd/2020/09/20/US-Dollar-Outlook-Bearish-on-Mnuchin-Powell-Testimonies-Key-US-Data.html
  • The London trading session accounts for around 35% of total average forex turnover*, the largest amount relative to its peers. The London forex session overlaps with the New York session. Learn about trading the London forex session here: https://t.co/UTWxbnNz7M https://t.co/fuWSUDE1pT
  • The Federal Reserve System (the Fed) was founded in 1913 by the United States Congress. The Fed’s actions and policies have a major impact on currency value, affecting many trades involving the US Dollar. Learn more about the Fed here: https://t.co/ADSC4sIHrP https://t.co/eRTdlhAOFN
  • The Japanese #Yen may continue to exhibit a bullish behavior as the Bank of Japan (BoJ) appears to be in no rush to alter the path for monetary policy. Get your #currencies update from @DavidJSong here: https://t.co/HFjc6KGzRw
  • The New Zealand Dollar appears poised to extend its climb against its haven-associated counterparts as long-term trend break hints at cyclical upturn. Get your $NZDUSD market update from @DanielGMoss here: https://t.co/CPxP1Q8B6d https://t.co/n2wESiqnpJ
  • The US Dollar may rise against ASEAN currencies like the Singapore Dollar if local retail sales and sentiment data disappoints. USD/IDR may fall on the Bank of Indonesia. Get your market update from @ddubrovskyFX here:https://t.co/HpH8pXFdLl https://t.co/laHmaZXpJe
  • The US Dollar may rise against the Singapore Dollar and Philippine Peso. USD/MYR’s downtrend holds, but a bullish pattern brews. USD/IDR seems stuck between key technical levels.Get youe #ASEAN currencies market update from @ddubrovskyFX here:https://t.co/TF6DRVp6kX https://t.co/WEtxkdSwxD
Breakout Trades and the Power of Price Channels

Breakout Trades and the Power of Price Channels

2012-05-10 04:00:00
Richard Krivo, Trading Instructor
Share:

When Price Channels (sometimes referred to as Donchian Channels) are placed on a chart, they identify the high and the low price at which the pair traded over a specified period of time. The Channels on the Daily chart below are set to 20 periods so they would represent the high and the low at which the pair traded over the previous 20 days.

As such, they can be used quite effectively to visually identify levels of Support and Resistance on a chart. The channels can be used by “breakout” traders to identify entry levels. This would occur when price “breaks” below support in a downtrend or above resistance in an uptrend.

When the breakout occurs, this can be taken as an entry signal as the potential exists for price to continue to move in that direction for a period of time.

Let’s take a look at the example below of Price Channels on a Daily chart…

Breakout Trades and the Power of Price Channels

As noted on the chart, the lower channel line represents support while the upper channel line represents resistance.

As with most every strategy, the first step is to determine the direction that we should trade the pair. In the case of the EURCAD pair we know we want to look for opportunities to short the pair for the following reasons: 1) Price Action is below the 200 SMA and is pulling away from it; 2) at the time of this writing the EUR is weaker than the CAD, and 3) price has been making successively lower highs on this Daily chart since the end of February.

Now that we have determined the direction to trade the pair, we can look to a lower time frame chart to “fine tune” our entry. For our purposes on this pair, I prefer the 1 hour chart as we may be close to an entry.

When moving down to an intra-day chart (anything below a Daily) we will change the indicator to 55 periods. We do this to slow down the indicator a bit as we have moved to a faster, lower time frame chart.

Breakout Trades and the Power of Price Channels

If/when price breaks below the lower channel line at 1.2941 a trader could sell the pair. The stop would be placed above the upper channel line at 1.3041. As can be seen, the price channels have provided us with our “breakout” entry along with our stop placement.

To manage the trade as it progresses, a trader would manually trail the stop by keeping it just above the upper channel line. The trade would be closed when price action retraces to the point that it intersects the upper channel line and the stop.

Next: How to Trade the Aroon Indicator (18 of 50)

Previous: How to Trade Commodity Channel Index (CCI) in Forex

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

DISCLOSURES