Paris in the 1920’s…
As Coco Chanel knew only too well, there are clear cut rules for trends.Â Similarly, when it comes to market trends and channels however, successively higher highs or lower lows are needed to create a trend. As for the visual aspect, it can certainly be very helpful to dress up these trends in the some of the finest threads in finance, channels. From these channels we generate signals using a channel breakout.
Channel the Highs and Lows.
A simple channel optimized is a great way to visualize the Highs and Lows over a certain period.
Lets first see how easy this would be to achieve in Equilla:
First of all, we define inputs, here they are being the Period of time we want to look back over, and our visuals set to true so we can see the results. Then our variables, resultH being the high and resultL being the low. Subsequently, using the FC function to calculate the highest number in this period and then Drawline to draw it. Exactly the same is done for the lowest, subsequently now we have our Upper and Lower bands. These are simply created from the highest and lowest numbers from our specified period, shown here below over US Steel.
Channeling the channel breakout …
What if we wanted to use the channel itself to create a strategy? First of all, we could simply take the ResultL the low of the channel and if that was lower that and the previous Low ResultL we would short, exactly the same for the Highs. The code being this:
We could also put the Period through an optimizer to find the optimal level, subsequently we would get:
Consequently, as we can see below when applied to US Steel we have the same bands generating the signals:
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