Can be used on every timeframe but I prefer 1Minute to 1Hour candles, 1Day-timeframe triggers are not very often. Example pictures are from the 1hour chart. Trading divergences allows to set tight stops. But trading divergences is also trading countertrend most of the time. parallel channel enhances the win/loss-trades ratio and still enters fast enough to don´t get in to late.
Theoretic part and Rules What´s a parallel channel? The parallel channel is basically a linear function f(x)= ax +b and the same function with another value for b. In other words, an angle of price/time copied to another extremum. So, the break of channel shows us changing in price/time power. The Rules (example bullish reversal) Trend is bearish, RSI was < 30 (Extra Rule for RSI: the first extrema that is combined with the second one has to be in the extreme zones of the RSI (below 30 for searching bullish, over 70 for searching bearish signals)) RSI divergence = true Channel anchor 1 is first lowest low Channel anchor 2 is second lowest low Channel anchor 3 is the high of the price at the time that would lead to the highest upperchannelline (the linear function with the highest value for b), alternative: highest high Set a buystop to the upper channel if you like to trade aggressive. Or use extra Entry Execution rules to enhance the strategy more… if close[1] > upperchannel then Signal == true or if close[1] > some MA then Signal == true or if …
Legend: Pink shows the divergence Yellow is the parallel channel with highlighted anchors Turquoise is the trigger of the signal Red shows us which Signals get filtered out.
Pictures BUY BUY SELL SELL Buy false trigger SELL filtered out BUY filtered out
Hi Has1988, I'm also sculpting this strategy. Nice to see your work on it also. However, I don't understand what you meant by trigger and false trigger, and what you expect of price should it there be a trigger. I will be glad if you can also mention any challenges you've encountered with this strategy, so I can consider them also.
For me, I use MACD. And, I draw the channel using FIRST the Peak or Trough between the divergence points. Might need to go lower on time frame to see that.
For me, I use MACD. And, I draw the channel using FIRST the Peak or Trough between the divergence points. Might need to go lower on time frame to see that.
Thanks anyways.