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Trading Puts in the Channel

We came into today looking for a trade in a tight trading channel. Any time you have a situation like this in the market, you have to pick wisely. We were able to look back on a five and fifteen minute chart to determine a channel that formed throughout the morning. Having the pivot in play also helped us determine this particular entry. Price had fallen below the whole number of 1.3500 and climbed up above the pivot. We decided to enter our trade on the most recent climb up to the pivot and took our put option at Redwood options. Without any pain, price started to drop in our favor back down to the whole number of 1.3500. This trade worked out by nearly 3 pips and allowed us to move on with our trading day in a stress free fashion.

We were watching the famous number of 1.3542, but price wasn’t near their at the time we were looking at the chart. In situations where trading channels have formed, you need to be careful with your entry point. You don’t necessarily need to take the high of the channel or the low of the channel. You need to figure out where a good support/resistance formed during the time this channel was created. You should also look back on longer time frames to find out if there are other areas of support and resistance. In this case, we have several plays made at this level on a 15 minute chart. Knowing that Price had held on both support and resistance allow us to enter this trade with more confidence. In the end, we had a nice winner before the US markets opened up.

In the image below you can see how price was coming down to the whole number 1.3500. Price had pushed through it by several pips only to push back up, reaching above the pivot level. This channel was forming based on the price action that occurred earlier in the day and yesterday. You can see our entry candle by looking at the green arrow. These were the last two candles before the US markets opened up. Notice the two doji candles and that is how our trade finished. Soon after our exit, price climbed to new highs for the last few hours. After reaching the new high it did pullback to the downside, almost getting to the Lows of the day. Since then, it has climbed up to resistance one and almost challenged our favorite number 1.3542. This could be tested later on.
We like our pivot trades
We’ve monitored the 42 level on several different price points on the EURUSD. We will continue to monitor these levels, assuming they keep working. As long as you can find a good entry point, you should get a good trade on these purple lines. Make sure you calculate how far away price action gets away from it before entering a trade. You don’t necessarily want to trade this area every time. Over the last 24 hours we saw two wicks close just below this area. The question is, will price action finally push through it, extend through it, or stay short of it. It’s up to you to determine how price action is moving at that particular time of trading. We will continue to trade these levels going forward and hope to see some good trades. If you have any questions about this type of price action you can always leave a comment below and we’ll do our best to get back to you as soon as possible.

Risk Disclaimer

Comments

  1. I’ve been watching these 42 levels ever since you mentioned it back in the day. I really like how it works. Can you please try to keep covering this aspect of trading in your videos and on the website. Thanks for all the help. I made money today trading this price area.

    • Thanks for the feedback on the channel. It’s also nice to hear you taking advantage of this particular price area. I may have to write a book about. Stay active and thanks.

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