All Angles of Defining the Trend Properly (part 4)

Full article here: https://buff.ly/23gyAGR 

Hi Traders,

Today’s blog post focuses on how traders can use trend channels to their advantage when tackling trends, reversals and sideway price action. We will be discussing the best channel characteristics, channel expansions such as overthrow and under throw, and angles.

Trend channels

The best trend channels are characterized by a few important aspects:

• A good angle is visible which is not to steep nor too shallow;
• There are multiple price hits on the channel (minimum 4);
• Price respects the internal channel lines;
• Most price action is contained in the channel;
• Some of the price action can be outside of the channel.

Let us now review these points in more detail.

Good angle

A trend channel is not supposed to be too steep or too shallow. A trend channel needs to have a balanced angle because then price is moving in a rhythm that is showing trend strength and sustainability.

Too steep channel:

This is not a trend but a momentum or impulse. Price can keep moving strongly within the momentum but eventually price will be lose its steam and need to make a bigger correction. The correction will break the channel because of its steep angle.

Too shallow channel:

In this case price is not showing sufficient momentum in the direction of the trend. A weak angle in fact shows a corrective pattern.

Sideways channel:

In this case price is not even able to build an angle, which means that price is building a range or sideways price action zone. Price cannot trend if it’s moving flat.

What is good, too shallow and too steep? These terms are very discretionary but we will try to quantify them, although they remain rough figures at best.

First of all, it’s best to use a chart setting where 150 to 200 candles are visible. This chart setting shows the best market memory.

Secondly, an angle of 30-45 degrees is considered to be an optimal angle for a trend channel. Anything below 30 degrees is shallow and above 45 degrees is steep. Steeper and shallower channels are still useful and good channels but are not consideredtrend channels.

Multiple hits

The minimum number of hits on the channel is 4. Anything lower than 4 is considered a potential channel. A channel becomes more established and valuable when more hits are visible.

In case of a downtrend channel we need to see 3 hits on the bottom. The 3rd hit on the bottom in fact changes the potential trend channel into a confirmed downtrend channel. The 4th touch is connected to a top.

In case of an uptrend channel we need to see 3 hits on the tops. The 3rd hit on the top changes the potential trend channel into a confirmed uptrend channel. The 4th touch is connected to a bottom...

.......................................... Full article here: https://buff.ly/23gyAGR