Trades for September 6, 2017.
And take it one step further and look beyond generating entry signals; structure your position sizing and money management around your trading objectives.
The template file is included in the zipped folder which contains all indicators for this strategy. Two moving averages which will serve as trade filters along with the RSI indicator are also added to the mix.
This strategy is hinged on the breakout system with the RSI and moving averages serving as filter. If you recall our lesson on the RSI as an indicator, you will remember that we said that figures above 50 are bullish until the price reaches the overbought zones and values below 50 for the RSI are bearish until the line gets to oversold areas.
Trend confirmation is obtained from the direction of the moving averages, especially the period moving average. Please note that there are three Donchian channels plotted. You are not to use all of them at once. You should select the time frame short, medium or long term , choose the appropriate Donchian channel and make the trade.
For short term trades, usually taken on the hourly chart, delete the period Donchian channel and use the period and period channels. For longer term trades 4-hour and daily charts , delete the period Donchian channel and use the period and period channels. Long Trade The long trade is made when the following parameters are fulfilled:. The trade is closed manually when the price action turns down and breaks the Donchian period channel.
The stop loss for the trade is set below the period moving average. This is completely contrary to what you see all over the web with 20 somethings driving fast cars making fast money. Trading can be a supplemental income stream for those of us who were born before the Facebook era. Richard Donchian created Donchian Channels, which is a type of moving average indicator and a look-alike of other support and resistance trading indicators like Bollinger Bands.
Traders use Donchian Channels to understand the support and resistance levels. The channels are wider when there are heavy price fluctuations and narrow when prices are relatively flat. Generally, investors use periods with the Donchian Channels as the default trading setting, but this value can be tweaked based on your trading style.
We have selected these securities due to the recent oil price fluctuations in the market. In the below image, you can see that the wider price range is highlighted in blue while the narrow price range is in yellow. Donchian channels are mainly used to identify the breakout of a stock or any traded entity enabling traders to take either long or short positions. As you see, we placed our Donchian channels indicator on the existing trend which is visible on the left side of the image.
Now, in the below image you can see that we have highlighted major breakouts. At the extreme left of the chart, on the lower side, we have identified a price breakout of a downward trend, signaling traders to open a short position or liquidate long positions. Accordingly, the stock had a sharp correction after a few days. Donchian channels again indicated a buyback position during the mid-week of May Meanwhile, we have also identified the price breakout on the lower side of the channel, indicating the start of the new downtrend in the stock.
We have highlighted this in blue in the below image. Also, note that you need to confirm the uptrend or downtrend, with two consecutive touchpoints of the Donchian channel before pulling the trigger on a trade.
The middle band is the average of the upper and lower bands. The middle band in Donchian channels could also be used as a breakout indicator. If the stock rises above the middle band of the Donchian channels, then you can open a long position. On the contrary, if the stock is trading below the middle band of the Donchian channel, then a trader can open a short position. For the below chart, we have identified buy and sell positions for Apple, based on the Donchian channels middle band.
When we discover this correlation between Donchian Channel and MACD, we would be able to filter the false entry signals and attain a better success rate for our trade opportunities. This is definitely a lucrative return in the span of two days. The stock had a wide trading range in the two months given fluctuating gold prices. We have selected the default Donchian Channel 20 and Volume Oscillator for this period. At the same time, the Volume Oscillator started rising and crossed above zero indicating strong volumes at these levels.
We have highlighted the buying opportunity in violet for both indicators. After initially trading flat, the stock delivered outstanding returns for a number of days before indicating a sell signal on June 10 th , and this trend was supported by the Volume Oscillator, which was heading below zero while prices were falling.
We have identified the sell position in red for both the trading strategies in the below image. Lastly, we are going to cover a trading strategy with the Stochastic Oscillator and Moving Average. We have taken an Amazon chart from May 22 nd , to June 24 th , These stocks have been within rising trend channels, but recently have broken the trend channel to the upside.
Such a breakout usually signals two potential outcomes: These stocks are moving within well-established trend channels and have recently pulled back toward channel support, presenting a potential buying opportunity. Trending higher overall, and trading near support following a pullback, these stocks are in the buy zone. Gold, silver and oil have bounced recently, but technicals indicate that prices could head lower again. These stocks are near breakout levels both on the long-term and short-term charts, which means a big move could be coming.
Facebook shares cleared three-year channel resistance following a three-month test. Buy a bounce is a strategy that focuses on buying a given security