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AUD:USD - Daily. Trend Channel Strategy

CMC Markets

Hi Everyone,

2 days ago I posted some thoughts on a potential sell set up off trend channel resistance for traders using daily charts

Price did stop right at the trend channel resistance and the set up was triggered at the close of yesterday's candle

To assist readers I've set out one approach to trading strategy for this set up on the chart below

For swing traders looking to sell into corrective rallies, the hourly chart also looks interesting as I'm writing this post, so I'll do a separate post with some thoughts on it as well in the near future.

The strategy outlined on the chart uses the following rules

  • The set up required price to reject or make a peak at or very close to the trend channel resistance.  It also required confirmation of this resistance in the form of price closing below the candle making the peak. Entry was at around this closing level
  • The initial stop is placed just above the latest peak
  • If a downtrend develops the stop is moved down behind any corrective peaks in that trend
  • Half the position is bought back if price retraces 50% of the most recent rally. This is a point of control to which price often returns. A price filter has been applied to the actual retracement level to set a profit objective of 1.0093
  • If price reaches the support on the other side of the channel a one candle trailing stop is instituted on the second half of the position until such time as the stop is triggered or there is a candle with a high below the support. If price breaks right through the support on the other side the stop is left at the break out point and Fib projection techniques can be used to determine a more aggressive profit objective

Cheers

Ric


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