Master The Forex Channel Projection
Master The Forex Channel Projection
In technical analysis, a channel in forex trading is defined as the area between two parallel trendlines and is often taken as a measure of a trading range. There are many forex books about channels forex trading, and most traders know how to draw a channel trading but not many know how to use the information to create the channel to find possible turning points in the market. This is a lite article from Trading For Beginners about "Master The Forex Channel Projection". You would first identify a trend and draw a trend line. Next you duplicate the exact angle of that trend line and move it to a recent high in an up trend or a recent low in a down trend. This produces a channel. The idea is that as price approaches the upper channel line in an up trend we would expect to find sellers there and this would either reverse the trend or at least pause the trend for a time. In a down trend you would expect the same thing. As price approaches the lower channel line you would expect to find buyers and for the trend to stop or temporarily pause for a time. If price overshoots the channel line this can often signify an overbought situation in an up trend or an oversold condition in a down trend. This overshooting of the channel line signifies an exhaust of momentum in the market.
Source: Mark McRae
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