The 3 H-L Channel System

...cont'd from yesterday...

Cont’d discussion about The Compleat Guide to Day Trading Stocks

The Three High-Low Channel System. This is the most complex one in the book.

This system uses a combination of the Momentum Indicator and two Moving Averages.

First, use a 28 period average of the Momentum Indicator. When the Momentum Indicator is above its 28 period Moving Average, assume the trend is up. Vice versa for downtrend.

Second use the following as a "trend filter". When the trend is up, take only the buy entries. When the trend is down, take only the sell short entries.

Then, subject to the trend filter, when price hits a Moving Average of the 3 period highs, sell short.

When price hits a Moving Average of the 3 period lows, buy.

Exit open positions when price hits the opposite Moving Average or on an adverse move equal to 1 ATR of the last 3 periods.

...cont'd tomorrow...

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