Thursday, March 8, 2012

Trading Price Structure / Context: Bear Channels

Here is how I trade price structure / context, specifically bear channels. If not recognized, a trader can lose a lot of money getting chopped up in a bear channel.

If you're trading WITHIN the bear channel you want to:
- Sell the highs
- Avoid trading in the middle
- Could buy the lows, but the probability becomes reduced
- Should always have your target on the other side of the channel, REASONABLE. Dont expect that you picked the point where the market will sell off or rally in your direction a million points. Be realistic. 

Waiting to trade in the longer term direction here, which is Bullish, you need a BOT signal to the long side. I don't usually take the initial BOT signal long (as I should in the wedge example), I take the 1st pullback after the BOT.

The chart explains my way of trading bear channels and the continuation into the longer term move expectation.

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