sorry... i didn't see this post until now haven't been keeping up with this journal i will answer your questions
i'll do my best to answer your questions. if you have any more questions feel free. i don't have a trading system based around channels. i use range and fibs for entries and exits. if you wanted to traded solely based on channels.... i would say ... wait for a pullback on a swing time frame in an uptrend ..for example one hour chart or two hour chart. when the pullback amount is comparable to previous swing pullbacks. ..wait for a big bounce which looks like the trend has returned and the pullback is over. when it runs out of steam to the upside... draw a TL above... sloping down that gives you two points... 1st and 3rd. ...your 2nd point is the low of the pullback now you have 3 points and you can draw you channel. this is a down channel in an uptrend now you attempt to go long on a drop to centerline... or 50 %... center line of the channel your stop would be somewhere below the 50% line your target is the upper wall of the channel... if it breaks thru the upper wall, then you can attempt to ride a return to the trend... where your profit target would new trend highs if it can't, then it could easily make a new lower swing low but if it reaches the upper wall, you have moved your stop up accordingly in a down channel, your trendline points are on top in an up channel, your trendline points are on bottom if you need an up channel, and you only have points below.. in other words a lower low with a bounce in between... you can use a pitchfork... not a channel what do i use these for ? i use these to try to pinpoint the end of a swing turn that is.... using three points in a minor down trend to get point 4 for a return to major up trend ... and vice versa for a major down trend ... although i find they work better to pinpoint a return to an up trend having said that.... i base entries and exits on range expansion limits and fibs... as i said already. --------------------------------------------------------- reminder... higher lows, you can draw an up channel if you have 3 points lower highs , you can draw a down channel if yo have 3 points lower lows, you can draw a pitchfork upwards higher highs, you can draw a pitchfork downwards my meaning is that these conditions give you the most reliable channels and forks any other questions... feel free
Thanks for your reply. I am still a little confused about which 3 points to choose. In an uptrend, meaning there are higher highs and higher lows, are u saying that u take 2 LOWS to make a trendline, and then draw another parallel line to the highs? I use the 2 HIGHS for an uptrend to make a trendline, and then parallel it to the low. For a downtrend, i use the 2 LOWS to make a trendline, and then parallel it to the high. Is this the wrong way? Channels are very powerful, but the key is to know what exactly are the RULES TO GET THE 3 CONNECTING POINTS. I also use pitchforks, 50% channel retracements, 50% channel extensions, and drawing trendlines connecting HIGHS to LOWS. I find that example going short on an upper channel gives the best risk reward trade, however I am still unable to create a system out of it. Cheers
in an uptrend. you take the first two lows... connect them the third point occurs between those two points... on the top in a downtrend you take the first two highs... connect them the third point occurs between those two points... on the bottom nothing is right or wrong in trading... if you can make money with it. ....having said that, Jimi Hendrix forms his channels this way ... and we all know how well he plays guitar for myself ... i definitely consider this to be superior to the way you are describing. but like i said... nothing is right or wrong if you are making money.
after the fact........... looks easy after the fact the trick is... to have it drawn BEFORE price arrives