NB_SHI_Channel Indicator For MT4
Table Of Contents:
- NB_SHI_Channel Indicator For MT4
- Trading ideas with the NB_SHI_Channel Indicator For MT4
- NB_SHI_Channel Indicator For MT4 - Buy At Support And Sell At Resistance
The NB_SHI_Channel Indicator For MT4 automatically plots a price channel. The upper trend-line joins the major market highs, while the lower trend-line connects the lows, resulting in an area between which an asset price is expected to bounce. This helps traders time their entries and exits in a more precise manner. The NB_SHI_Channel Indicator For MT4 is drawn based on the assumption that unless proven otherwise, prices within an up trending channel will continue to rise, while a down sloping channel will bring about lower prices. As such, entering long when price approaches the rising support line in an uptrend, and exit when price nears the rising resistance line is a profitable strategy. A widely used risk management strategy is to place a stop loss order just below the support line. The above trading strategy is flipped on its head in case of a down trending channel. Sell short when price draws near the dipping resistance line and cover when price closes in on the falling support line. The stop loss could be placed just above the resistance zone.
Trading ideas with the NB_SHI_Channel Indicator For MT4
One of the best ways that you can go about analyzing the market is to use an indicator that places the price action into a channel. The reason why I say that this is one of the best ways to approach technical analysis is because, through the mere angle of the channel, you are able to see the underlying trend of the financial trading asset that you are looking at.
The steepness of the channel also tells you the intensity or the strength of the current up or downtrend. Nevertheless, I have actually attached the picture below just to show you what the indicator looks like in reality.
In the picture above, we captured the USDCHF pair on the hourly chart moving in a downtrend as shown to you by the angle or downward angle of the green channel. You have the upper line and also the lower line. The upper line as mentioned connects the major highs and the lower line connects all the major lows.
But what is interesting about this indicator is that in between the upper and the lower line of the channel there is also a midpoint line. At the middle line you can see certain turning points in the market that you can also use it to analyze and deduce the dominance of any prevailing trend.
If you find that the market is trading mostly about the upper channel of the channel indicator, you will know that the market is bullish. Similarly, when the market is trading in the lower channel of the channel indicator, you can deduce that the market is currently in a downtrend. This is irrespective of whether or not the main trend is up or down.
Because ultimately when you in an uptrend you want to capture the small reversals that sees the asset moving from the lower channel into the higher channel. And when you are in a downtrend you want to capture those small reversals when the market is moving from the higher channel into the lower channel.
Because if you are in a downtrend, and you enter the market in the lower channel you will not have a favorable risk to reward ratio. Similarly, when the market is in an uptrend and you enter whilst the market is in the upper channel of the channel indicator you will enter the market too late, thus throwing your risk to reward off.
NB_SHI_Channel Indicator For MT4 - Buy At Support And Sell At Resistance
Which brings me to the next point, where we actually talk about a trading strategy or trading opportunity that you can independently deploy in your own portfolio.
Looking at the image above, I have attached the screenshot with some descriptive data which explains how you can use this phenomenal trading tool. First off, on the left-hand side, you saw that I marked off an uptrend which you could use as a guideline for reversal trades. But you need to wait for the market to break this uptrend line which was drawn in red.
However, the channel indicator will obviously be in an upward-facing trajectory. So what you can do is, you can wait for the channel indicator to readjust until it changes its angle from up facing into a downward-facing channel. That way you know that the market is about to make a reversal.
Now that we in a downtrend, the idea is basically two capture those moments when the market reaches resistance. The resistance, in this case, will be the extreme upper line of the channel indicator. So when the market reaches this level - you will need to wait for the price action to print a reversal pattern or it needs to give you hints that it is about to reverse.
In the picture above, you can see that there was a possible sell move which you could have exploited. In that sell area, you can see that the wicks of the candlesticks - like five wicks - have flipped to the upside which gave us a clear indication that the market was rejecting any buying activity that wanted to exceed the price beyond this resistance line.
So with this rejection being apparent to us, you can then look at selling. What is great about this tool is that you can also use it for setting your take profit targets. How this works, is that the middle line will be your first take profit target, and then the extreme lower line will be a second take profit target if you are selling.
So when the first take profit target is reached, all you need to do is move your stop loss to the break-even point. If the market moves in your favor, to eventually reach the second take profit target - you can move your stop loss to the midpoint line of the channel. This way you know that you will actually have a stop loss in profit and even if the market comes and hits your stop loss, you can still come away with a net win which is the ideal situation.
But just bear in mind that the second take profit target will not always be reached. Therefore, it is always good to split your trade into two take profit targets - the middle line and the extreme opposite line. The same logic can be applied when using the indicator to execute a long trade. The middle line will be your first take profit target because you have identified a small reversal on the support line which is the lower line. Then your second take profit target will be at the upper line which is the extreme opposite line of your entry.