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Forex Trading Guide 2021: Parallel Channels – Trading Strategy

Parallel channels are among the most common and popular chart patterns in market analysis. They provide opportunities for earning that do not depend on the location of the market: trending or non-trending state, and also do not depend on the selected time interval.

You can identify parallel channels by finding two peaks and 2 minimums. If we have found this kind of channel, then we can safely use the strategy: wait for the price to reach the upper or lower trend line on the chart, and then define the setup.

There are two options for price behavior at a given point:

1. The price may bounce off the channel border and then continue its actions in the opposite direction up or down.

2. A breakdown of the channel boundaries can also occur. The price can break the dominant trend or break in the opposite direction, and a reversal will occur.

The chart below shows how the price, after the fifth touch, reached only the middle of the channel and again rushed to the lower border of the channel, which indicates a possible change in the trend and breaking through the lower border.

In this situation, it is necessary to enter the market only after additional confirmation appears – this is the formation of a lower maximum or the transformation of the lower trend line from support into resistance.

We open a short position when the price returns to the lower trend line.

You need to set a stop loss to the high of the bar or candlestick that preceded the breakout.

At the level indicated on the chart, the first target for fixing part of the profit was determined. The position can be completely closed below at the level of 900; support is also visible in this area, since earlier there was an upward trend reversal.

There are parallel channels at all time intervals. The entries and exits to the market are visible to the naked eye. This pattern is an excellent risk / reward ratio. It is very easy to trade this pattern, it is enough to define it on the chart, then wait for development and earn money for its implementation.

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