Does anyone use the tunnel method for Forex trading? I am still in the learning phase of Forex, but have tried this method the last couple of days with pretty good results. Vegas recommends using a time frame of 1 hour or higher. But I was having success this morning with 1 minute and 5 minute time frames. Was this just luck, or does anyone else use shorter time frames with this method? BJS
I just read the article - very interesting. It's amazing that coincidentally one of the systems I designed for currencies on 1 hour bars uses almost identical concepts as the tunnel method. I have been enjoying healthy profits in all the pairs I trade with my method. RoughTrader
You should have been trading the tunnel method (on any time frame) in about February of this year - you would have been chopped to bits. The last month or 2 the majors have been trending nicely - so just about every strategy will work well. The test of a good strategy is to try it during months when the trend is not so strong. I have a friend that trades forex successfully using the tunnel method as part of a larger system - but he trades of the 4 hour time frame. The systems founder Vegas himself has stated the one hour time frame is prone to whipsaw, let alone the one minute time frame, and he too has moved on to the larger time frames. In the very early days I traded the tunnel method on the 1 minute time frame. When the market moved it worked well - but the choppy sideways periods were bad and this is the achilles heel of this system.
Any channel or tunnel method like the one designed will whipsaw when the markets move sideways. I'm assuming Vegas uses stop orders to enter and reverse positions, and this is particularly prone to whipsaws because FX prices tend to spike in extreme manners before reversing. I've developed a couple of techniques to filter out this whipsaw effect, so that is probably my "edge". I don't really know for sure, but I would presume that many channel-type strategies would be very profitable with such filters. RoughTrader
Thanks for the comments. So maybe look at the ADX first to see if the market is trending before you enter tunnel trades? I have also thought that maybe you could look at the next higher time frame to get the current trend (e.g. if you want to trade the 1 hour, first look at the 4 hour chart to see what the trend is). So what are good methods for non-trending markets? Do you play off of support and resistance?