Tuesday, August 28, 2012

Channel trading

By looking at the losing trades of my previous expert advisor I thought about the next trading strategy. It should trade in channels. A channel is a range of candles bounded by two lines with similar slopes.
Those lines are the support and resistance lines of this group of bars.
The idea is detecting those lines, decide if this is a good channel or not, and trade when the price touches the lower line for long and vice verse for short.
The stop loss should be very small since it's a resistance line and the target should be near the support line.
The first challenge in writing such and expert advisor is find the best support/resistance zone. Then decide if it's a good zone for trading.
I already implemented the channel detection. I also implemented the trading section and the results are not bad. It has a small profit factor and now I am facing the second mission: decide if the calculated zone has a trading potential or not.
By visual testing the EA I see a lot of good trades. It makes a lot of trades (I tested it on EURUSD 15 minutes time frame) and it worth further development from my point of view.
My EA draws the lines for testing purposes.


An example for a trade made by channel EA

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