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Trading Channels and trends

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					                       E-Mini Trading Trading Channels and Trends with Success



e-mini traders find that price action falls into two broad categories. The majority of the time the market
is range bound or forming a continuation channel. At other times, however, the market breaks out of
these continuation channels and begins to trend up or down. I have yet to find a satisfactory definition
for the term "trend," and I have been working on it for nearly 25 years.At this point in my trading career
I prefer to view trends as any sustained directional movement either up or down. Of course, I am well
aware of that many "purist type" e-mini traders have mathematical criteria, or specific definitions of just
is exactly what constitutes a trend. I would expect these individuals to review my broad interpretation of
trending behavior as faulty. In general, I have found most of these "purist type" definitions
unsatisfactory for my scalping trading technique. I am interested in only small segments of the market
and tend to view trends as I referred to them early in this paragraph. If the market is moving in a specific
direction for a sustained period of time, I will conclude that the directional movement is indicative of the
direction of short term e-mini prices.

In short, I take a very short term of my trading horizon and nothing in my style relates to swing trading
or other trades with a lengthy time frame.That being said, a continuation channel is a period of sideways
movement typified by a specific range that serves to hold market pricing in a narrow band. Many trading
educators discourage trading in channels as they can be unpredictable and volatile. By ignoring any sort
of channel based trading activity, e-mini traders are taking themselves out of potential profits any time
the price action begins to form a channel, which is nearly 60 to 70% of the time.Why do people avoid
continuation channels?It is my view that most systems based trading methodologies use oscillators and
indicators to indicate potential e-mini trading setups. In a trending market, oscillators and indicators can
be accurate and mostly helpful. But there is a problem with indicator based trading, especially in
continuation channels. Most indicators lag the market by several bars, which compounds the problem of
trading in channels. In my view, most oscillators and indicators are of little value in channeling market.
On the other hand, I really do not require an indicator to inform me that the market is trading in a
channel or is trending. A simple glance at the chart being traded clearly indicates choppy and narrow
trading ranges, and trends are self-evident.For the purposes of this article, I am not going to elaborate
on how to trade trending and channeling markets.

On the other hand, my trading style allows me to trade channeling and trending markets. That
statement comes with a caveat, however, as the techniques used in channel trading are diametrically
opposite than techniques for trading a trending market. To be sure, most charts present trading
opportunities and trading methodologies are dictated by the market structure at the time of trading. On
the other hand, I am predisposed to trading with the trend, or previous trend, when I initiate trades in
the channel and I always trade back in the direction of the channel.

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posted:10/30/2012
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