Trading system based on price ranges


The following simple Stop & Revers system is a bit different than usual, an approach that is closer to his own logic to systems volatility breakout of the channel is considered a sign of extreme market conditions, therefore, the signal near the turn. Therefore, when the broken bottom of the channel (the market is oversold), a long position, and at the top of the channel breakout (overbought) opens a short position (ChannelReturning)

Enter long Cross (lower band, C)
Exit long Cross (C, upper band)
Enter short Cross (C, upper band)
Exit short Cross (lower band, C)

 The most natural way to use the price channel is, of course, the system channel breakout (ChannellBreakout)

Enter long Cross (C, upper band)
Exit long Cross (lower band, C)
Enter short Cross (lower band, C)
Exit short Cross (C, upper band)

But in its purest form, such a system in many markets makes unsustainable results. Therefore it is often added to it rules that allow to select the most likely times of onset of moves after breaking boundaries. One possible idea is to open a position on a pullback after the breakout of the channel price must roll back in the opposite direction (support line is a line of resistance, or resistance line into a line of support - it is one of the main features of market charts!), And then only for position held in the direction of the channel breakout. To turn this idea into a trading rule, you need to determine which is the pullback. Possible definition of price pullback is the achievement of the price channel.

On this idea, a system of channel breakout with rollback (ChanBreak & PullBack), which uses two channels - the main channel, a breakthrough which offers position and channel rollback - reaching the boundaries of the channel (the border opposite the boundary of the channel, a breakthrough is making the trading signal ) is a criterion held rollback. The system also introduces a time-out parameter rollback position to break through the main channel will be opened only if the rollback (reaching the opposite of the channel rollback) held no later than the specified number of candles.

It is believed that this type of behavior to which the system is configured ChanBreak & PullBack (achieving a new high, pullback, then continuing the upstroke), typical for markets with large participation of large (institutional) players. After the new maximum they will take profits, the market pulls back down, but if the fundamental conditions continue to be favorable to growth, the market will go up vigorously. Opening a position in this market in a consolidation phase to minimize risk. The latter made up is also a natural benchmark to fix the profit in a long position open on the pullback.

System with a narrow range

Closely related to the systems based on channels, though unusual in the type and method of use of borders is an interesting system with a narrow range, the idea is suggested T.Chande. It borders channels are made up of points, which are forecast price values, calculated by the method of linear regression. The upper limit is obtained by applying the indicator Time Series Forecast (TSF) to the prices high. The lower bound is, respectively, TSF (low). Since the indicator TSF indicates the expected value of the price that would occur in the case of an earlier trend, the deviation of the actual observed rates of probable value TSF means possible change in trend. Hence, such a deviation is seen as a signal to open the position.