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The CAP channel trading indicator, as the name suggests, is used to channel trade. In other words, it uses an envelope strategy in which the price falls within a channel bound by an upper or lower line.
The overbought area acts as the upper channel, and the oversold area acts as the lower channel.
This indicator is volatile and sensitive. It assesses the daily price differences of instruments to determine demand and supply areas.
The indicator can be used to trade any currency pair. It also works well for trading strategies that are either long-term or shorter-term, on timeframes of 15 minutes or greater.
How to Open Buy and Sell Signal Using the Indicator
Buy Signal
- Wait for the price drop to get support in the lower band
- Buy when the red cross appears. It is worth entering the trade after the closing of the bullish candlestick pattern.
- Stop Loss below the most recent swing low
- You can exit when the price crosses the upper band of the indicator.
Sell Signals
- Wait for resistance at the top band to occur.
- Sell when the indicator shows a green cross that indicates a market correction
- Place your stop loss higher than the swing high.
- You can exit when the price reaches or crosses the lower channelline.
Conclusion
The CAP Channel trading indicator can be a great tool for traders who use channel trading strategies. It plots price charts and factors in price volatility, and then plots an envelope where the price ranges.
As a trader you simply need to wait for the price line to touch it, post red crosses or blue crosses and exit when it touches the opposite channel line.
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