Channel Trading Setup & Signal In AUDUSD Currency Pair

Hi Forex Traders,

Thank you all for visiting this site and I know that a significant number of you keep coming back  to this site to learn and study the forex strategies that are listed here.

I’ve been also watching this downward trade channel trade setup for a while now in AUDUSD currency pair and price is now about to hit the downward trendline. I’ll be watching for a bullish reversal candlestick signal to buy.

TWO POSSIBILITIES

What goes up  must come down eventually and what goes down must come  up one day. Now the price is heading down so there’s two reversal points on this pair that I see.

1. the first is the channel trendline on the lower side…I expect a bounce from there is I see a bullish reversal candlestick pattern. This is shown by the white line on the chart above. Now, the price may not go all the way to the upper side of the channel as shown, this is just an good guess based on the characteristics of channels.
2. the second thing that can happen is the channel will be broken and price will head down to the major support level and bounce back up from there. Also you need to watch for for a bullish reversal candlestick pattern to buy there if it does so.

These are powerful signals so take heed.

HOW I WOULD BE TRADING THIS CHANNEL TRADING SETUP

1. Note that the chart above is taken on the weekly timeframe. I intend to switch down to a lower timeframe like the 1hr & the 4hr and watch the price action there and make my trading decision and execution there. If you like to trade the daily timeframe, that is also good and it would be definitely much more reliable than the 1hr and the 4hr. But for my case, I want a good entry and little stop loss distance that’s why I’d be in the 1hr & 4hr switching back and forth between these two to see the best place/signal to buy.
2. My stop loss will be placed a few pips below the low of the bullish candlestick which I would use as my signal to buy.

UPDATE

The downward trendline channel has been touched and from the price action there, it looks as there may be an upward bounce.

Now, this is the closer look in the 4hr timeframe and how the price action was playing out:

I will see how this trade plays out next week.

2ND UPDATE DEC 8TH 2014

Ok, folks, here’s how the trade mentioned above panned out. The trade you saw above was a 1st trade which got stopped out with a 52 pips loss.

Price intersected that channel line and went below and got me stopped out but regardless of that, I still felt that it would most likely turn back and head back up so I was waiting in the 4hr timeframe to see what kind of bullish reversal candlestick I get.

I was rewarded with a nice bullish hammer candlestick pattern. That was my signal to buy. So what you see below is my 2nd trade attempt and is currently running. I will also update this post and tell you how it pans out tonight or tomorrow or during the week.

2hrs later, this is how the trade is looking:

UPDATE 9TH  OF DEC 2014

Ok, guys, this 2nd trade attempt at AUDUSD has also turned into a loss. As you can see on the chart below, price bounced back down from the 4hr downward trendline.

So the next major support level to watch out for will be the 0.80640. Switch to the monthly timeframe to see this level. Price may reach it in January 2015. This is something to keep an eye out for.

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