Our indicator today is not one of the popular indicators yet, but it’s growing popularity among the Forex traders in their forum; the SHI Channel indicator.
Channel trading in general is one of less use trading method, however it has its fan who trading the two methods of channels: Channel direction follower and Channel breakout.
The MetaTrader version of the SHI Channel indicator (SHI_Channel_true.zip) was created by Shurka & Kevin
The SHI Channel indicator and as the all of the channel indicator uses the highest high and lowest low of the price to determine the upper and lower bands of the channel.
In the SHI Channel The channel is calculated according to the given period of calculation and the time frame of the used chart, and the channel is self-adjusted (Like the Bollinger Bands).
As you see in figure 1 there are two thick lines that indicates the upper and lower channel and a dashed center line.
The channel gives the overall direction of the price movement - up or down - and may change from time to time, specially if it used with a low timeframe (1, 5 and 5 minutes).
Actually you can’t trade with the SHI Channel indicator alone, it will not tell you when to enter the trade neither when to exit, The SHI Channel indicator telling you the overall direction of the price trend and the channels with the middle line warn you how much the trend is strong or weak, however , you have to use another indicators to generate the entry/exit signals...For more info you can go to :http://forex.eazel.com/2006/06/29/shi-channel-indicator/ "
SHI channels which automatically recalculate in real time gives us the direction we are going to trade. If slope is down we are only looking to sell, if slope is up we are only looking to buy.
If the channel is thin (narrow) we dont trade .
If price falls outside the channel we dont trade(unless in a trade already) we wait for a new channel to form.
Remembering we ONLY trade in the given direction of the slope of the SHI channel!!
for more info go to :http://fxovereasy.50webs.com/TheSystem.html
Trends & Breakout
An important measure of the quality of a pattern is the trend that precedes it. It does not matter whether the trend is bullish or bearish, but the consistency and duration of the initial trend partly determines the well-formedness of the pattern.
The pattern is said to have "broken out" once it has crossed either the support or resistance line. If the pattern broke out in the same direction as the preceding trend, it is called a continuation pattern. If breakout is in the opposite direction, it is called a reversal pattern.
For example, a pattern described as Bullish Reversal Triangle would mean that it is a bullish signal, that is, the breakout was through the resistance line, upward. Because it is a reversal pattern that means the preceding trend was in the opposite direction as the breakout, that is, the preceding trend was bearish.