Stock targeting – a simple, effective strategy

Stock targeting – a simple, effective strategy

Channeling Stocks (or Rolling Stocks) can be a very accurate and reliable trading strategy that will provide the trader with accurate entry and exit points.

When a stock repeatedly moves up and down in waves between two parallel lines, it is said to be channel moving or rolling. One line is drawn through the highs and one through the lows. This forms the channel. The upper line is called the resistance line and the lower line is called the support line. Some traders choose to trade within the channel and enter or exit the trade when the price approaches the support or resistance line. Others prefer to trade breakouts, entering or exiting the trade after it exits the channel.

One of the biggest advantages of this strategy is that it gives us precise entry and exit points. Greed and fear are a trader’s worst enemies, but emotions have no place in a system that uses strict buy and sell signals along with stop-losses or trailing stop orders.

These are the three types of channels: ascending channel, descending channel and horizontal channel. An ascending channel is an ascending channel that is identified with higher highs and higher lows. A downtrend is a descending channel that is identified with lower highs and lower lows. And the horizontal channel (also known as the rectangular channel) is identified by horizontal highs and lows.

There are several ways to trade channels:

-Trade in the direction of the channel. Long positions can be entered into ascending channels, with the price moving up until the support line of the channel is broken. Short positions can be entered in a descending channel, exiting once the price breaks the resistance line.

-Trade within the channel. Long positions are entered when the price bounces off the support line and sold near the resistance line. Shorts are entered when the price bounces off the resistance line and covers near the support line.

-Breach of a trade channel. This strategy does not provide a starting point. Long positions are entered when the price breaks the resistance line and short positions can be entered when the price breaks the support line.

Check for channels in different time frames. Many times you can predict when a channel will go down by checking other time frames. The channel you are currently trading in one time frame may be an advance or decline within a channel of a longer time frame. Choose the appropriate time frame for your particular type of trading: weekly or monthly charts for long-term trading, daily charts for short-term or swing trading, intraday charts for day trading.

Channel trading is a very simple yet effective strategy that works well for both beginners and professional traders. As you should with any new strategy, paper trade before adding channel trading to your trading toolkit.

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