trading channels

Can somebody explain to me why channels work? Is it because we believe in them? What is the reason, besides some math numbers, why it works?

 

... it doesn't matter why they work

 

They work because prices are random.

 

I disagree, as a discretionary trader I need to know why it works.

 

Channels 'work' because of the math which defines them. Just as 'Pivot Points' represent static areas of 'S' and 'R', Channels represent dynamic support / resistance levels which surround a trend.

HTH.

- Spydertrader

 

Channels emerge because the markets are examples of flocking or herding behavior. Ideas of support and resistance are fundamentally psychological. Even the robots that make up most of the volume have to be programmed to reflect our psychology.

Channels work up until reversals start working.

 

Getting off topic here. Which is the right way of drawing a channel?

 

Create a right trend line between Points 1 and 3 of the trend. Clone this right trend line to create a left trend line on Point Two of the specific trend.

- Spydertrader

 

I like to place my channel lines a little above the highs and a little below the lows.

 

Channels are one of the few things that works SOMEWHAT in short term trading.
(although when it no longer works, you lose everything you got before, and more...).

If you insist on trading channels, trade a FEW options every month (or every signal), don't bet the entire house at once.