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Use Price Channels to Trade Futures Based on Support & Resistance Levels

Price channels can be used to identify then analyze support and resistance price trends when trading futures or forex. These trends can provide market movement indications that may act as signals for buying and selling futures trading positions.

Backtesting price channels of a specific financial instrument can help provide guidance for trading future market movements.

Locating a price channel can act as a day trading indicator in current market trends. When you spot a trading channel, there is a directional trend either up or down. These 2 parallel trendlines represent support and resistance levels. Once identified, you can trade the channel up and down until the financial instrument’s price action breaches the channel.

Below is a EUR|USD forex trading chart with support and resistance channel levels:

How To Spot Bullish Price Channels

Bullish channels occur when at least two price action levels move higher within a range, bound by support and resistance lines. As long as the price action remains in an upward direction within the support and resistance, it will be considered a bullish trend.

Once the channel is breached by either the support or resistance line, it is no longer considered part of the current price channel. If the trend continues to move higher, but breaches the resistance line, it is considered part of a new, accelerated rate bullish trend. If the trend breaches the support line of the channel and begins to move downward, it is considered a bearish trend reversal.

How To Spot Bearish Price Channels

Bearish price channels occur when at least two price action levels move lower within a range, bound by support and resistance lines. As long as the price action remains in a downward direction within the support and resistance, it will be considered a bearish trend.

Once the channel is breached by either the support or resistance line, it is no longer considered part of the current price channel. If the trend continues to move lower, but breaches the support line, it is considered part of a new, accelerated rate bearish trend. If the trend breaches the resistance line of the channel and begins to move upward, it is considered a bullish trend reversal.

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