Submitted By: Paul Zozem
(c) Paul Zozem, http://zozem.com
Paul is an experienced trader who uses trend channel analysis and actually moderates the Forex Group on Myspace. Here he shows us in a video how to create and use trend channels.
Filed under: Analysis-Technical | 12 Comments
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These trend channels are perhaps the most obvious form of technical analysis. Obvious, in this case, is also appropriate, especially for the beginner. When just beginning into the forex market, studying these channels and watching how prices move through, top to bottom and bottom to top, will give you a sense of how the market works. Soon you will see the price leave the channel and the speed with which it leaves can be very surprising. As it leaves, you will often see the price build momentum, that is, the price will begin to move away from the channel faster and faster until for some unknown reason it just stops dead. Leaving the channel is called a breakout. Momentum can best be judged, on a quantitative basis, by particular indicators, RSI is one that I like to use. Finally, it will stop dead due to some kind of resistance. Learning to predict where it will break out is a real art form, how fast it will move depends on fundamental factors and the degree of confidence or fear in the traders who are observing the price change. Where it will stop or temporarily stall can often be estimated by other forms of analysis.
Many experienced traders also use these channels. Obvious is often the best.
“Many experienced traders also use these channels. Obvious is often the best.”
Couldn’t have said it better myself.