There are many theoretical schools in the technical analysis of foreign exchange trading, and any method that can stand the test of actual combat and achieve good results can become a very practical method in the school.
I believe that the most frequently heard word when trading in the foreign exchange market is "trading with the trend". In the previous article, the editor also introduced some methods of trend trading.
Today, the editor will share with you the trend trading tactics of a veteran with 8 years of trading experience - channel trading method (pipeline trading method).
In the classical trend theory school, the channel trading method is a very useful method of trading with the trend, which can help you get considerable profits in a wave of trends. Trading using price channels (referred to as channel trading) is a simple and effective trading method, which is suitable for both new traders and traders of various levels.
Because the pipeline trading method has the characteristics of simplicity, flexibility, and ease of planning, he has been able to insist on using it correctly after mastering this trading method. It is precisely because of this that he can often keep pace with the market rhythm during transactions, grasp the trading opportunities, and earn a lot of profits for himself.
Let's take a closer look at the pipeline trading method!
01 The concept of price channel
1 The formation of the price channel and its elements
In the K-line chart, the exchange rate objectively shows a variety of price patterns, such as triangle, flag, rectangle, wedge, head and shoulders, W, arc, pipeline, V, etc. , the price channel type is one of the most common.
A price channel is an objective representation of exchange rates in a graph. The price pipeline elements include: the upper pipeline line (the AB line segment in the figure), the lower pipeline line (the CD line segment in the figure) and the graphic trajectory of the price movement.
The trajectory of the exchange rate is the integration of market behavior and chart technology, while the upper and lower pipelines are the product of technical processing based on the actual exchange rate turning point.
The upper pipeline is in the descending pipeline: the upper pipeline is a price pressure line determined by two or more (including two) adjacent high points, as shown in Figure 3, the upper pipeline AB is the pressure formed by two points D1 and D2 Wire. In the ascending pipeline: the upper pipeline line is a parallel line parallel to the lower pipeline line through a certain high point (the high point selected by the pipeline manufacturer according to the rules), as shown in Figure 1, the upper pipeline line AB passes through the high point D2 and the support line CD parallel.
The lower pipeline is in the ascending pipeline: the lower pipeline is the price support line determined by two or more (including two) adjacent low points; in the descending pipeline: the lower pipeline is through a certain low point (the pipeline maker according to The low point chosen by the rule) is parallel to the upper pipeline line. In horizontal pipelines, after the first pipeline line is determined (upper pipeline line or lower pipeline line), the second pipeline line (upper pipeline line or lower pipeline line) must be parallel to the first pipeline line.
The price pipeline pattern shows that during the period of price pipeline development, the high and low price turning points of the market price progress are restricted by the pipeline line, and this nature is the basis for pipeline transactions.
2 Price Pipeline Levels and Classifications
A price channel is an objective form of market price development, which repeats in a similar form in different time periods, and the channel type has different time levels.
Price pipeline levels include time-sharing pipeline, daily pipeline, weekly pipeline, monthly pipeline...etc. Time-sharing pipelines exist in time-sharing charts, daily pipelines exist in daily charts, and so on.
Different pipeline levels have, are or will depict the price trajectories of different time spans in the market, providing a basis for investors to design different investment cycles such as short-term, mid-term, and long-term.
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Classification of price channels: According to price fluctuations, price channels can generally be divided into three categories: ascending channels, horizontal channels, and descending channels.
Rising pipeline: indicates that the market price is in an upward trend during this time period;
Horizontal pipeline: indicates that the market price is undergoing horizontal consolidation;
Descending Conduit: Indicates that the market price is in a downward trend.
Obviously, the price channel category's objective expression of the price trend provides investors with an indication of what they should do next.
3. The practice of price pipeline
The price pipeline is composed of upper and lower pipeline lines, and the way of pipeline lines follows the principle of determining the upward trend line and the downward trend line in the Dow trend theory.
The practice of different types of pipelines is different, but the principle of drawing lines is the same, that is, when the first pipeline line is determined, the second pipeline line must be parallel to it.
The method of ascending pipeline: first make the lower pipeline, and then do the upper pipeline (see Figure 1). Draw the lower pipeline line (CD) through the two low points of D1 and D3, and then draw the upper pipeline line (AB) parallel to the lower pipeline line with D2 (high point).
The method of descending the pipeline: first make the upper pipeline, and then the lower pipeline (see Figure 3). Draw the upper pipeline line (AB) through the two high points of D1 and D2, and then draw the lower pipeline line (CD) parallel to the upper pipeline line with D3 (low point).
The practice of horizontal pipeline lines: there is no order for the upper and lower pipeline lines, which mainly depends on the order of two adjacent and similar high points and two adjacent and similar low points. If the former appears first, do the upper pipeline first and then the lower pipeline, and vice versa if the latter appears first.
02Price channel trading method
The price channel trading method is simple and clear. Specifically, it is to implement buying and selling operations according to the nature of the channel line supporting and blocking the market price.
According to different risk preferences, pipeline trading can be divided into two methods - homeopathic trading method and two-way trading method.
Price channel transaction example
1 The method of homeopathic trading
The trend-following trading method is suitable for both ascending channel trading and descending channel trading. The basic trading idea is to only open new positions following the trend of market prices, and close positions when the price operation encounters the obstruction of the pipeline.
As shown in Figure 1, when the price rise pipeline is drawn through D1, D2, and D3:
When the price returns to point M1, buy and open positions;
When the price rises to point S2 of the upper pipeline line, sell and close the position;
When the price returns to the M2 point of the lower pipeline line, buy and open positions again;
When the price rises to point S3 of the upper pipeline line, sell and close the position;
In this way, use the rising channel to repeatedly trade with the trend.
The operation method in the descending channel is the same as that in the ascending channel, the difference is that the trading direction is opposite.
This trend-following trading method is characterized by being more stable, with a higher probability of success and less risk, but the trading opportunities are relatively reduced, and the investment income obtained in the same market cycle may also be less, which is suitable for more stable investors.
2 two-way transaction method
The two-way trading method is suitable for all kinds of price channels, especially for horizontal price channel transactions. The basic trading philosophy is not to lose possible trading opportunities, strive to efficiently use price channel trading information, and ignore market trends.
For example, in Figure 1, when the ascending pipeline is drawn through D1, D2, and D3:
When the price rises to the S1 point of the upper channel line, sell and open a new position, and when the price falls back to the lower channel line M1, buy and open a new position while closing the sell transaction;
When the price rises to the point S2 of the upper pipeline line, close the position and close the buy transaction, and at the same time do the operation of selling and opening a new position. In this way, the price pipeline is used to carry out two-way repeated transactions.
This two-way trading method is very active. If you cooperate with the stop loss plan, you will get more trading opportunities and may get higher returns. But at the same time, there are more risks. It is suitable for those who are more active and strong in risk tolerance. investor.
This trading method has high application value in horizontal pipelines.
03 Matters needing attention in price channel transactions
1
Investigation of the price pipeline
The performance of the price channel in the market process is different, and it is closely related to the strength of the market trend, whether there is a trend in the market, and the activity of market transactions.
For example: in a super market trend, there is generally a lack of short-term price channels. At this time, the research and application of price channels need to be investigated in a longer time span.
Another example: when the market is extremely active or the bulls and the bears are fighting each other, there is generally a lack of short-term horizontal price channels, and the research and application of horizontal price channels also need to be investigated in a longer time span.
2
Plan before trading
Experienced investors can tell at a glance that the weakness of the pipeline trading method is that it cannot solve the price crossing problem by itself. That is, what should a trader do when the price penetrates the lower channel line downward or the upper channel line upward?
Plus, pipeline deals don't address the money management issues that determine an investor's long-term survival in the venture capital market.
Therefore, the pipeline trading method must make a good investment plan before the transaction. Its approach is:
1. Use price channel information to solve the problem of when to buy and sell and when to stop loss in the trading plan;
2. Use the theory of fund management to solve the problem of fund allocation in the plan;
3. Overcome fear and execute the trading plan.
The pre-transaction plan is the basic condition for the efficiency of the pipeline trading method to be brought into play, but whether the pre-transaction plan can be fully implemented is a key and decisive step for the pipeline trading method to obtain investment returns for investors.
04 last
Good methods and good plans are theoretical, just things on paper, and their value must be created by the behavior of investors.
Remember: A method not used is no method, and a plan not implemented is no plan.
Practical experience tells us that the reason why investors cannot execute trading plans is because they have fear in the face of market risks. Once investors are affected by fear, any trading plan and trading discipline will be wiped out.
Therefore, like the application of other trading methods, the pipeline trading method requires investors to conduct simulated trading first. In the process of simulated trading, they can not only test whether the trading method is suitable for them, but also help them overcome their fear, so as to ensure Execution of the trading plan.
Source: Internet, the published content is for reference only, does not constitute any investment advice and sales offer, and does not involve any commercial cooperation. The copyright belongs to the original author or organization. Some articles were not contacted with the original author when they were pushed. If copyright issues are involved, please contact us through the background to delete them in time.
I hope this article can make foreign exchange traders get out of the confusion when they are in confusion. Old rules, if you haven't understood it, please bookmark it first! Welcome to leave a message to communicate with the editor!
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