Contents:Trend Channel indicator is a trend-based strategy which helps traders ascertain market trending conditions using the Linear Regression channel and leading indicator Relative Strength Index (RSI). This article will tell you everything there is to apply the strategy to profit from the binary options market.
What is a Trend Channel indicator?
The Linear Regression channel is a built-in indicator that is mostly used to display trending movements. It’s constituted of three parallel lines, automatically highlights trends when added. This tool is highly favored by financial traders all around the world because of its simplicity, flexibility, and effectiveness. Supporting for the Linear Regression channel is the basement indicator Relative Strength Index. Developed by J. Welles Wilder and published in 1978, this powerful indicator which is mainly applied to identify market momentum and reduce to the minimum wrong trading occasions has quickly gain traders’ appreciation thanks in large part due to its accuracy.
Therefore, it can be said that the Trend Channel is a comprehensive trend-chasing strategy as it meets all the requirements of a trending system.
Being tested for nearly 18 months, the Trend Channel has proved itself to be a very flexible and effective trending strategy. Its win-rate is so far confirmed at 87.55%, which is one of the highest win ratios in the binary options trading world. Besides, it has many advantages, and the most wonderful one is that it could be used in any trading time frame and on any instruments.
The 1-day chart is the chart that the Trend Channel works best on. There are regularly about 2 to 5 signals defined every month.
How to use the TrendChannel?
Setting up the strategy is very easy and fast as all the necessary beacons of the strategy are available in Finmax’s advanced platform. The trend channel users just need to add a 5-day RSI and a Linear Regression channel to ascertain the current trend.
Conditions for a buy CALL option:
- Prices approach the lower line of the Linear Regression channel with signs of a bounce;
- The RSI line comes back above 30 from the oversold area.
Buy Signal: In an uptrending market, the channel is also moving up. Wait for the price to retrace back towards the green gravity line and open buy order.
Conditions for sale PUT option:
- Prices approach the upper line of the Linear Regression channel with signs of a bounce;
- The RSI line turns back below 70 from the overbought area.
There are some important rules when trading with this strategy:
- Traders should enter only one order at a time;
- The candle of confirmation must be fully close before a signal is confirmed valid;
- The expiration of the position should be set 6 times larger than the chart’s time frame.
For example, if you are trading on the daily chart, you should choose the 6-day expiry.
If you like this strategy, you might also be interested in this Bollinger Bands explained
Pros and cons
- All-purpose, simple, and flexible;
- Generates precise signals;
- Enables traders to collect huge profits from big trends;
- Requires no additional indicators.
- Necessitates a high level of patience;
- Requires traders to constantly watch the trading platform.
If you are struggled to find out a good trending system, we highly suggest using the TrendChannel. With a dominance in win ratio as well as advantages, this strategy is absolutely a splendid companion for trend-following traders who love the simplicity and accuracy. However, we must also note it doesn’t mean that the strategy can beat the market as there is nothing called “100% win-rate” in the trading world, so don’t forget to use risk controlling and psychology managing methods alongside