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Sideways Trend TradingтАФTrading within the Channel

Sideways Trend TradingтАФTrading within the Channel

Another good procedure for using the MAC as a day-trading vehicle is to trade within the channel. This simply means that in an up trend, you will attempt to buy retracements to the moving average of the lows and exit these positions when prices have rallied to the moving average of the highs or higher. Then, when prices decline once again to the moving average of the lows (if they do), you will buy again hoping to sell on a rally to the moving average of the highs or higher. For those traders who would like to maintain their positions once they are established at the MAL, a stop loss under the MAL by several ticks may be used. Therefore, the position may be carried through to the end of the day in order to take advantage of the trend should it continue.

When selling at the MAH in a down trend, the trader will attempt to take profits once prices decline to the MAL, hoping to reestablish short positions on a rally to the MAH. Both of these procedures, however, tend to limit profits, since you are cutting profits short not knowing whether the trend will continue in your favor.

The best time to use the above techniques is when there is no defined trend. In other words, when the market is moving relatively sideways within the MAC, this technique can allow you to trade many times, buyВэing MAL support and selling MAH resistance. As an example, consider Figure 7-8, which illustrates my point.

Because the MAC technique I have just described is a trading method and not a system, you must be aware that it is adjustable to the needs of the trader and will not work in the same fashion for all traders who use it. Once you begin to use this technique, you will develop individual adaptation to the methodology which may suit your purposes better than what has been described herein.

This technique may not, in fact, be suitable for all traders. You must find your own place with it, and you must determine whether this is the technique you wish to use. For those who are interested in trading freВэquently for small moves within the day and within an established trend, I believe that this technique is ideal. If the trend should change drastiВэcally during the day you will be stopped out of your position, and you will then, provided there is sufficient time left during the day, have the opportunity to trade from the other side of the market.