Channel trading strategy is one of the most profitable trading strategies for the short term oil trader. When the price is confined within a specific region the advanced channel traders buy the channel support and sell at the channel resistance.
However, it’s highly advised that the new traders only trade in the direction of last prevailing trend while trading the channel. Taking trades in the direction of the prevailing trend with price action confirmation signals creates much more accurate and reliable trading signal. However, some experienced professional also use previous key support and resistance level for trading signal confluence.
Let’s see and example channel trading in the Oil chart:
Figure: Buying the channel support in the oil chart with price action confirmation signal
Short term trader always prefer channel trading system in oil since it provides more trading opportunities which are highly reliable and accurate. In the above figure, a bullish pin bar is printed right on the channel support which acts as price action confirmation signal. Price action confirmation entry helps the traders to enter in to the trade with very tight stop loss and excellent risk reward ratio.
This system suggests that every trader should take trade in the direction of the last prevailing trend of the market. Yet, some traders aggressively buy at the channel support and sell at the channel resistance without any price action confirmation signal. But in the long run aggressive traders lose more money than making while trading the market.