It is a Channel, but in stead of the I added the four Fibonacci lines and colored three of the five ensuing zones in suggestive colors.
The blue zone is up trend zone
The gray zone is ranging zone
The orange zone is down trend zone.
The white zones are 'in betweens'
For the fibs to function properly it needs to be a 20 - 30 period channel.
Gave the borders a title and added better remarks in the script code.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.
Stocks that move in the blue zone in both frames are candidates for picking. I also look in the weekly chart to check that the Fibonacci lines do not give resistance.
If I take position in a stock I use the low border of the 3 hourly as a stop-loss. Every week I move the stops to the new position of the 3 hourly low border. After a month the stop should close in profit.
I keep the stock until the stop triggers. Usually this method gives profit in around 70 percent of positions taken, while the losses of positions closed with a loss are below a few percent. This keeps the risk low.
Overall this method is profitable and it ensures that you only invest in stock which are rising.
For short positions I advice to chose stocks in the red zones and put the stop at the high border of the 3 hourly channel.
How to trade
- Best to use in ranging market conditions
- Place on two different time frames eg. 15 and 55 min.
- Take trades off either short or long term chart.
- Best trades occur when both charts show same trigger/condition.
- Trades are short term reversals in direction of major trend on longer term chart unless you expect a trend reversal.
- Determine which band is the limiting band for the volatility of the instrument.
- When the market closes outside of the limiting band then returns inside, take a long/short one tick above/below the high/low of the previous bar.
- Place stop below/above the low/high of the the recent swing low/high.
- Set targets at opposite band of chart