Channel Trading in the Morning
May 25, 2006 by Trader Rich
Does anyone channel trade the US Session? I've been doing so here and there but have been keeping track of any and all channel breaks during the past 3 weeks in the following currency pairs:
- GBP/USD
- USD/CAD
- AUD/USD
- USD/JPY
I think that I can say that from my limited observations over 3 weeks, these pairs definately move more consistently in the morning US session than others.
Another observation I've made is that the AUD/USD seems to be a great pair to trade. I never would have thought this was the case but I've found it to be very steady once the price breaks a channel line. If anyone has traded the GBP, you know the wild swings that occur frequently but it doesn't happen in the AUD/USD. Once the channel breaks, it takes its time to reach a bit of profit but it eventually does. Over the last 3 weeks, this pair has 7 wins and 1 loss. Run-ups have ranged from 30 pips to 90 pips with the average around 30-40 pips. The drawdowns have been very good with a maximum of -18 pips. This is assuming that your using a 20-30 pip stop. This pair actually was good for 30 pips today for me and helped me bring my losses down to around -50 pips.
Let's assume that your risk/reward is 1:1 for simplicity. If you have a 30 pip stop and a 30 pip limit, here was the performance of these 4 pairs over the last 3 weeks. I should note that the runups on some of these trades were substantial so if you rode it out for longer, the risk/reward would have been much greater.
GBP/USD - 4 Wins, 3 Losses (+30 p)
USD/JPY - 6 Wins, 3 Losses (+90 p)
AUD/USD - 7 Wins, 1 Loss (+180 p)
USD/CAD - 8 Wins, 4 Losses (+120 p)
I pick and choose my channel break trades and therefore it is discretionary. I find that I don't pick the right one though but if I was to take every channel trade over the last 3 weeks, I would be up 420 pips and this is with a 1:1 Risk to Reward.
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Call me conspiracy minded but there seems an orginized effort to take out stops, It just happens to often that the high/low spikes past the logical place most of these courses/mentors are telling us to place our limit/stops and closing out what was otherwise a good trade prematurely. I think channel trading is probably most suceptables to this behaivior.
If you want an opinion (albeit from someone who has never traded a live account).
Get rid of all indicators except a couple of moving averages and the MACD, and start plotitng your pivot point. Read some of Peter Bain stuff. I can send you a PDF if you want.
I’ve been using your pivot points S2-R2 as well as a horizontal line midway between each on the EUR/USD and it is uncanny how the price action moves right around these lines.
Bain also talks about predicting highs and lows. Today’s predicted high for the EUR/USD was around 1.2840 and the low 1.2770 based on your pivots. I don’t put much faith in this aspect other than general target/launching area.
It seems like there is no prediction value in most indicators and the KISS principle really applies
Two of your posts struck a cord with me a while ago, one of which was that most of the fxcm contest winners trade the Eur/usd exclusively and the second being three articles you referred to where the author talked about price action being the only truly valid indicator. It seems possible to make money trading only the EUR/USD with a simple pivot poiint method.
Just food for thought
David, thanks. If you could send me the pdf, that would be great. I like a lot of what you said and I’ve recently started using pivot points again.
I have to say again that a lot of what you say makes a lot of sense (especially after reading it again).