Channel Trading

Support & Resistance Trading within the Channels

130 West 42nd Street, New York, New York, 10036 * Tel: 866-59-VELEZ * Fax: 646-417-6537

Accolades for Todd Hanson Ph.D.

Trading within Support and R i t Resistance Ch Channels l

Support and Resistance pp

Trading within the Support & Resistance Channels

Trading within the Support & Resistance Channels

Trading within the Support & Resistance Channels

When prices hit the bottom trend line (Support Support)) this may be used as a buying area. When prices hit the upper trend line (Resistance Resistance)) this may be used as a selling area.

Support and Resistance pp

Trading within the Support & Resistance Channels

When the currencyy shifts between 2 p parallel trend lines (Support (Support and Resistance) Resistance) the channel is created. The first thing to do in creating a channel to depict the primary trendline, above the highs for a downward trend or below the bottoms for an up up--trend. trend Connecting at least 2 subsequent highs draws a downward straight line. It can be used to demonstrate profit opportunities received during a trend.

Trading within the Support & Resistance Channels

Trading within the Support & Resistance Channels A channel is effectively working in two trend lines (Support pp and Resistance) Resistance) which are depicted p p parallel to each other, the lower line acting as the support, and the higher line as the resistance. It can be upward downward or sideways upward, sideways, as other trends channel. In an upup-channel the support line is the most essential trendline, in a a--down channel the resistance li iis th line the mostt essential. ti l Penetration of the bottom trendline (Support) Support pp ) shows a falling currency and a potential trend reversal. Penetration of the upper channel trendline (Resistance Resistance)) demonstrates the currency appreciation. appreciation

Trading within the Support & Resistance Channels

Trading within the Support & Resistance Channels

Trading within the Support & Resistance Channels

Trading within the Support & Resistance Channels

Range, or the horizontal channel is characterized by absence of a Range, strongly pronounced uptrend or downtrend trend of an exchange rate rate. As the range channel prices fluctuate in a range of the average value.

Price Support Types 1) Prior P i High Hi h Support S t – This Thi fform off supportt occurs when h a currentt low (dip) revisits or retests a prior high/peak. Often, this support point coincides with the 55% retracement level. Prior High Prior High

Low Retests Prior High g 2) Prior Low Support – This form of support occurs when a current low (dip) revisits or retests a prior low. In essence, this is a 100% retracement of the prior rally. rally

Low Retests Prior Low(s) Buy Rule #1: Any trades or Grey Box Signals that occur at or near these support points have very high odds of success

MA Support Types 3) Trending Moving Average Support – This form of support occurs when an up trending pair pulls back to or near the rising 48ma or 14ma and stabilizes. Often, this support point becomes stronger after the first successful rebound off the 48ma.

48ma 48ma Retests 4) Flat Moving Average Support – This form of support usually occurs when there is a flat 14ma beneath the price. It is not often that a pair falling back to a flat 14ma fails to at least stall for a period of time. The first move to a flat 14ma will usually result in some form of rebound, if only temporarily. Flattish 14ma Flat 14ma Support B R Buy Rule l #2 #2: Any A trades t d or Grey G Box B Signals Si l th thatt occur att or near these th MA supportt points have very high odds of success

Price Resistance Types 1) Trending Price Resistance – This form of resistance occurs when a current high (rally) revisits or retests a prior low/dip. Often, this resistance point coincides with the 55% retracement level. Hi h R t t P i L High Retests Prior Low Prior Low 2) Prior High Resistance – This form of support occurs when a current high (rally) revisits or retests a prior high. In essence, this is a 100% retracement of the prior decline. decline High Retests Prior High(s)

Short Rule #1: Any trades or Grey Box Signals that occur at or near these resistance points have very high odds of success

MA Resistance Types 3) Trending Moving Average Resistance – This form of resistance occurs when a down trending pair rallies back to or near the declining 48ma or 14ma and stabilizes. Often, this resistance point becomes stronger t after ft the th first fi t successful f l decline d li off ff the th 48ma. 48 48ma Retests 48ma

4) Flat Moving Average Resistance – This form of resistance usually occurs when there is a flat 14ma above the price. A pair that rises to a flat 14ma will rarely fail to experience some form of resistance. The first move to a flat 14ma will usually result in some form of price lapse, if only temporarily. Flat 14ma Resistance

Short Rule #2: Any trades or Grey Box Signals that occur at or near these MA resistance points have very high odds of success.

Correlation in the Forex Market Statistically speaking, correlation is the measured relationship between two units over a series i off time. i C Correlation l i iis measured d on a range off -1 ((perfect f negative i correlation) to 1 (perfect positive correlation). A positive correlation implies that the two units move in similar directions, the higher the correlation the closer and more accurately these moves are. Conversely, a negative correlation represents opposite it movements t with ith a smaller ll ((more negative) ti ) number b representing ti a stronger relationship between the opposite movements.

Range Trading – Floor traders use pivot points to determine critical price and support/resistance levels. Notice the stops and orders are usually at 80 or 20 cents of the whole number – 80% of the market trades in ranges g – We see it work in a multitude of markets • Equities • Futures • FOREX

Remember •

You have to think it before you can act it. – Trade Your Plan

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Keep your emotions balanced! Balance is the key.

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Find the rhythm of the market

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Times when hen NOT to trade

FULCRUMS – What is a fulcrum? • the support about which a lever turns • Statistically to be points of inflexion

• To fine tune our trading plan— plan—in volatile, liquid instruments we add the Fulcrum grid: – – – –

00 the figure fulcrum 20 cents over the big figure 50 half the figure fulcrum 80 cents over the figure

The Art of Placing Stops 3 Keyy Points to consider: • Let the charts dictate where to place stops t and d profit fit targets t t • Ensure each trade has a superior Risk/Reward ratio • Consider the charts’ time frame • Tailor Stops and Targets accordingly based on the market movement.

The Art of Placing Stops Let the charts dictate where to place stops •

Protective stops should be placed below Support (in long trades), and above Resistance (in short trades)

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Support and Resistance levels should be drawn by connecting at least two significant low and high prices

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In trending market conditions, we should make every attempt to only trade in the same direction as the trend