What is acommon strategy traders implement when using aturtle channel




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What is acommon strategy traders implement when using aturtle channelWhat is a common strategy traders implement when using a Turtle Channel?

The most common trading strategy employed with the turtle channel is the original strategy that the indicator was developed for – a breakout trading strategy signaled by price exceeding either the upper or lower band of the channel.

The turtle channel is created by plotting the highest and lowest prices over the previous 20-period time frame, and then adding a centerline that plots the average of those high and low prices. The turtle channel is designed to contain within its borders nearly all day-to-day price fluctuations. When price penetrates above the upper channel band or below the lower channel band, the movement is interpreted as a significant breakout with strong market momentum in the direction of the breakout.

The basic trading strategy designed for use with the turtle channel is to buy the market on a price penetration of the upper channel band and sell the market on a price break below the lower channel band. Some traders use additional trade filters such as only entering a buy order if price closes above the upper channel band, or if price penetrates a certain distance past the border. For example, in forex trading, a trader might have the additional trade rule that price must exceed the channel band by at least 10 pips.

Another variation of this strategy is designed to catch and follow long-term trends. This variation implements the additional trade rule of only taking buy trade signals if they are given during an extended downtrend, or only taking sell trade signals that occur after a sustained uptrend. A breakout that becomes a long-term market reversal will be more likely to provide substantial profits after a prolonged trend move.

Once a trade is entered, the initial stop-loss is placed just on the opposite side of the centerline or outside the opposite channel band.