Short-term channel trade
Short-term channel trade in this case is opening of position and its support in interval from several minutes up to several hours. Short-term channel trade is possible because there are flats in the market lasting for some hours, sometimes for several days. During short-term channel trade the width of the trading channel as a rule, does not exceed 50 basis points.
Time-proved rules of work at short-term flat differ depending on width of the channel:
1) Channel width – up to 30 basis points. Opening of position is carried out around several points after rebound from the channel lines and must be accompanied by stop-loss order, which is more than 20 points distant from the channel borders. Thus, it is possible to protect the position from considerable losses. In general, experience shows low efficiency of such operations: profitability is low, and risk is quite high, because leaving channels of such size is often accompanied by considerable movement of price (pic. 1.3).
2) Channel width – 30-50 basis points. The rule of opening of position is the same as for 20 b. p. channel width; however, stop-loss order should be set away from the channel border. This is due to the fact that abrupt exit from the given channel is not an everyday phenomenon and, as a rule, is accompanied by presence of factors of fundamental character. Reverse or retracement of the formed trend quite often comes in 20-30 basis points (no more) after breakout of the channel lines. So tracing of market “volatility” for several previous days period will be the main recommendation. In general, trade in such channel can be quite profitable and more or less safe. The only problem is that considerable interval of time can be needed for revealing of the given channel.
The trade with simultaneous opening of opposite positions can be considered as a variant of short-term channel trade. It will allow to avoid risk of losses, connected with breakout of one of channel lines (pic. 1.5).
