Price Channel Indicator
Price channel indicator for MT5. Define the upper and lower price channels. Accurate buy/sell signals. Find breakthroughs.
Description
The Price Channel indicator helps to determine the fluctuations in the price of an asset between three parallel lines: horizontal, ascending or descending.
The indicator is quite useful for identifying breakouts when the price of a currency pair breaks through either an upper or lower channel.
In this guide, we will tell you about all the nuances and features of the indicator.
What is a Price Channel indicator?
The indicator offers possible signals based on price breakouts. They consist of an upper price channel, a lower price channel.
The highest high in a given period represents an upper price channel, and the lowest low in a given period is a lower price channel.
The period for these channels is 14.
The indicator is calculated by taking the highest high or lowest low in a given price range.
There is also a middle trendline that serves as a balance between the upper and lower channels.
Unlike indicators such as Bollinger Bands or Average True Range, the indicator is based on the difference between the lowest low and highest high, and as a result is associated with likely areas of support or resistance. Price channels such as Bollinger Bands and Average True Range tend to narrow during sideways movement and price consolidation, usually before a breakout.
As a result, the indicator can perform two functions:
- Determining likely support and resistance levels for channel trading methods
- Detect price breakouts when price closes above or below an upper or lower price channel.
How to use the indicator?
When the price turns up, the lower trend line of the indicator is drawn. Conversely, when the price turns down, an upper trend line is drawn. The magnitude of slopes and dips determines the trend. An ascending price channel is defined by trend lines with a positive slope, which indicates that the price is moving higher.
A descending or falling price channel, on the other hand, has trend lines with a negative slope, suggesting that the price is moving down with every price change.
The two price channel lines represent support and resistance. Support and resistance lines can be used to generate signals for effective trades.
Price Channel indicator trading strategy
There are several ways to use the indicator. You have the best opportunity to make money when the pair follows the outlined path of the price channel.
Indicator buying settings
- Price should close above the upper channel.
- Wait for the confirmation candle to appear
- Enter on confirmation candle
- Place a stop loss next to the recent low.
- Exit when the price falls below the upper channel.
Setting up the selling indicator
- Price should close below the lower channel.
- Wait for the confirmation candle to appear
- Enter on confirmation candle
- Place your stop loss near the recent high.
- Exit when the price rises above the lower channel.
Summary
The indicator allows you to profit from the price bounce between the support and resistance lines. It also helps in identifying breakouts.
As always, it is best to combine the indicator with other indicators to confirm the price trend.
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