The Horizontal Channel Pattern Forex Swing Trading Strategy

This swing trading strategy is simple and effective breakout method which is applicable to any currency pairs and useful in any timeframe.

The horizontal channel is an area of congestion between an upper resistance level and lower support level.

After every trend, the market will always consolidate and when the market is in consolidation, it tends to move very little up or down, tends to move sideways and one of the patterns that the market forms during this stage is the horizontal channel pattern.

The horizontal channel is defined by two lines; the line above is the resistance line and the line below is the support line.

Trading Rules:

Sell Entry:

1. The price must bounce from the resistance level.
2. Place a sell stop order when the price bounces with the confirmation of a bearish reversal candlestick.
3. Place your stop loss around 5-10 pips outside of the resistance level (or line) or place you stop loss anywhere from 3-5 pips or more just above the bearish reversal candlestick pattern which you use to enter a short trade.
4. Take profit at the support level.

Buy Entry:

1. The price must bounce from the support level.
2. Place a buy stop order when the price bounces with the confirmation of a bearish reversal candlestick.
3. Place your stop loss around 5-10 pips outside of the support level or place you stop loss anywhere from 3-5 pips or more just above the bearish reversal candlestick pattern which you use to enter a short trade.
4. Take profit at the resistance level.

ADVANTAGES:

• The channel patterns are not difficult to locate.
• The risk (or stop loss) is very small and the great thing about this is you are using support and resistance levels to base your stop loss on which is the best way to place a stop loss.

DISADVANTAGE:

• Needs more monitoring in a smaller timeframe, like below 4-hour timeframe.
• Horizontal channels are temporary.

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