Channel Trading Strategy for Silver Daytraders
Channel trading strategy in silver is very profitable if traded with price action confirmation signal.In general, we use three connecting points to draw a valid channel but here we will use two connecting points.The thirds connecting point or region will act as our potential buying or selling area.
There are methods of taking the trade with channel trading strategy. Traders can put a pending order at the channel support or resistance level with a tight stop loss just below the support level for long entry and for short the stop loss is set just above the channel resistance.Though this type entry has a success rate of 68.9% which is pretty decent in terms of silver trading but trading the channel with price action confirmation signal gives much more accurate and reliable entry.
Let’s see an example of channel trading strategy in silver:
Figure: Buying the channel support with price action confirmation signal
Professional day traders use highly reliable candlestick confirmation pattern to trade the channel support and resistance level. Though some traders prefer to take pending entry but full-time professional traders always prefer live entry with price action confirmation. In the above figure, a bullish morning star pattern has formed in the channel support zone which triggered the long trade for the silver trader.
Stop loss is placed just below the wick of the confirmation candlestick. Trader set their take profit level at the channel resistance for buy entry and uses the support level as take profit area for short entry.
Experienced traders only trade the third and fourth times when the price hit the channel support or resistance level since these two points are the most respected support and resistance key levels. When the price hit the channel resistance or support level for the fifth time trader ignores all price action confirmation signals since there is a high probability of breakout.