Trading by resistance and support levels is one of the most common strategies. There are a lot of variations in building levels: by local maxima and minima on different timeframes, Fibonacci levels, the use of channel indicators. The Volty Channel Stop indicator does not belong to any of these groups. In contrast to channel indicators, it draws only one line, simultaneously reflecting both support and resistance in different market conditions. Download this indicator for MT4, you can free online. But if you have a problem with finding it, write about it in the comments and we will send the template to you by email.
Trading by resistance and support levels
Volty Channel Stop is a combined indicator consisting of an ATR and a moving average. His formula allows you to determine the levels of resistance and support, displaying also the moments of trend reversal. Its code is open, the component indicators are simple, so it is easy to optimize. The Volty Channel Stop chart has a red and blue line below and above the price.
The strategy on this indicator is based on the fact that the breakdown of levels indicates a change in the market trend. The task of the trader is to catch long trend movements, open a deal and exit the market in parts. Timeframe – M15, currency pair – EUR / USD.
Channel Indicator Settings:
- MA_Price = 0;
- MA_Length = 1;
- MA_Mode = 0;
- ATR_Length = 10;
- Kv = 4.0;
- MoneyRisk = 1.0.
The remaining values of turning on or off the indicators are not fundamental, but they can be taken into account when optimizing.
Opening a long position occurs when the Volty Channel Stop draws a blue point after the red line. This means that the trend is changing. But since there is no 100% confidence in this, we are working on pending orders. Buy Stop is set at the maximum value of the candle, on which a blue dot +3 points appeared. Foot length – 10-20 points.
One third of the transaction is closed after making a profit of 10 points. We insure the rest of the position with a stop at the breakeven level. After the profit reaches the level of 20 points, we close another third and insure the rest with a 10 point trailing. The principle of opening a short position is similar only in the opposite direction.
As practice shows, the strategy has a significant drawback: trading by levels of resistance and support requires patience. The indicator gives a lot of false signals at the entrance, but the profit from the effective position is much higher than the average stop-loss, as the strategy is designed for earnings with a strong trend. You can also try to work with the settings on a demo account. Sometimes it gives a positive effect. The strategy is intraday, the frequency of the appearance of signals is relatively high. On other pairs (except exotic ones), the strategy also works, but changing the timeframe is not recommended.