Today, I’m going to be teaching you the day trading basics about what a channeling market looks like. I get asked this question very often. What the difference is between a channel, a market, a sideways market?
Well, it’s pretty much very similar. The thing is with channeling market is that it simply has bigger movements.
Like we have here.
OK, so how do I know that this is even a challenge? Channeling market? I start with making my areas and what I like to do with areas. I like to find the pivots. So here we have three pivots. So I’d like to look at channeling markets when they have three or more pivots that are almost within the same box. This box is about one point wide for me. So this is a good measurement for me.
So if you look here, they’re pretty even.
Right. We have one little take off here. So I would like to draw that in right away so that I know that this is now an area for me where the market has hit already three times and the same with the bottom. So I look for the range to be around one box worth and look here.
I have another three pivots that almost come to the exact area with areas you don’t want to make them too big, but you also don’t want to make them too small. However, they should be around the area. So this is a very typical channeling market and you’re literally going from one give it to the next to the next to the next to the next.
This area here, this is a resistance area. And when you have at the bottom, this is a support area. So a channel literally is just going from support resistance, support resistance. And your goal as a trader is to read it, to understand what is happening. I personally am not a big fan of trading within channels because you never know when the channel is going to switch directions.
Sometimes it doesn’t even hit the pivot and it decides to switch much sooner than where my entry was to stop me out because that’s the place that is now going to continue on. And look what happens here. This is what we have as a very significant break, and this is where I would now start to look for an entry if everything is to my green light and to my entry strategy points.
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And this is what your channel market looks like.