How to perform channel trading using Action Plan?
The home page of the Action Plan shows all the stocks you hold or plan to hold for long and short positions. It also gives you warning signs over all of your stocks at a glance.
You can add to your action plan by tapping the + sign near the bottom of the screen.
For each stock, red lights or green lights are displayed.
- Green lights tell you:
- You can consider increasing your position (either long or short)
- The channel will tend to carry on
- Red lights are the opposite:
- You can consider to decrease or clear out your position (either long or short)
The channel will tend to break or discontinue
The details of the green and red signals will make more sense to you after you do the exercise. You can come back to this later.
Green and Red Lights for Long Positions
They show the number of alerts for trading signals and conventional technical signals. Trading signals are issued when prices reach channel buy points, channel sell points, breakup and breakdown points.
For the sake of completeness, the system also offers manual stop-loss, manual take-profit, as well as buying or selling at market price or limit price. However, it is recommended that you replace stocks with no market direction.
For traditional technical analysis, the most useful signs are divergences, bias, and crosses. For an ascending channel:
- Position divergence and extreme negative bias are indicators that a new upwards channel may be forming.
- Negative divergence and extreme positive bias are signals that the upwards channel may be changing or breaking.
- A golden cross may correspond to the channel buy line.
- A death cross may correspond to the channel sell line.
Green and Red Lights for Short Positions
Similar to long positions, the trading signals tell you it’s time to act, either to short-sell or buy-to-cover the short position.
For a descending channel:
- Negative divergence and extreme positive bias are indicators that a new downwards channel may be forming.
- Position divergence and extreme negative bias are signals that the down channel may be changing or breaking.
- A death cross may correspond to the channel short line.
- A golden cross may correspond to the channel cover line.
Now, we are ready for action. Select a stock in the action plan and tap it.
Individual Stock Action Plan
The action plan of each individual stock gives you a clear indication of its current status, how to set up the channel, and how to trade according to the channel.
Setting Your Channel
In default setting the system shows the daily channel for you. You should first choose the time scale, day, week, or month, based on the investment category you defined in the “what to buy” session.
The system shows you the right most (up to date) channel for the past 100 days/weeks/months, with a minimum of 20 data points. By definition, if the price movement trend is less than 20 candlesticks, or if the supporting and resistance lines are too far from being parallel, the system will not show a channel. Again, it is suggested that you do not want to hold a stock without clear trends in your time scale.
Once the channel has been chosen, you can set the four trading lines: channel buy line, channel sell line, channel breakup, and channel breakdown. The default settings of these four lines are based on the channel width. You can adjust the lines with your finger so as to sell/buy a little earlier, or to wait for more confirmation.
Once the price reaches the channel buy point or sell point or breakup and breakdown line, the system will issue an alert.
Although we are proud of our default setting, we recommend you try the Custom Peaks and Dip setting to define your own channel.
- First select the day/week/month scale.
- Zoom in and out to your preferred range.
- Pick two peaks to form the resistance line.
- Pick two dips to form the support line.
Stock Alerts in Action Plan
The Action Plan provides three types of alerts:
- Buy-sell alerts based on channel. When the price hits the
- channel buy point
- channel sell point
- channel breakup
- channel breakdown
- Buy-sell alerts based on buying/shorting cost
- Actual cost. You can set the alert using
- highest buying price, or
- average buying price
- Take-profit. The default is 15% over your cost. You can adjust the % based on your expectation. When you actually buy stock it will indicate the take-profit $.
- Stop-loss. The default is 8% of your cost, you can adjust the %. It shows the $ when you buy the stock. One very important thing about the stop-loss value is that it is used in position management to calculate the risk level for the stock. It is recommended you keep the value within 6%~15%.
- It is advised to use channel over the statistical cost, take-profit, and stop-loss points.
- Actual cost. You can set the alert using
- Important technical alerts
- Has a 30 day and/or 60 day channel formed today?
- Has a golden cross or death cross been seen recently?
- Has it displayed positive/negative divergence recently?
- Has it displayed extremely positive/negative bias recently?
Now to the most important stage: buy, sell, short, or cover.
Placing an order – making a trade
Action Plan offers you two sets of trading mechanisms: Manual Trade and Automatic Trade. You can use them separately or together.
Manual Trade allows you to place a market order (current price) and to act according to the channel trading alerts.
Automatic Trade allows you to place a limit order (preset price) and to trade automatically when the price reaches the channel trading points.
In Manual Trade, the stock symbol, current price, the number of shares you already hold, and the cash left are shown.
For long positions, you can buy based on:
- Market: The current price to place a market order to buy
- Ch-Buy: channel buy point
- B-up: channel breakup point
You can sell based on:
- Market: The current price to place a market order to sell
- Stop-loss: Stop-loss based on cost, default at 92% of the last buy
- Take-profit: Take-profit based on cost, default at 115% of the last buy
- Ch-Sell: When the price hits channel sell point
- B-dn: When the price hits the breakdown point, where you may want to clear out your position
For short positions, you can short-sell based on:
- Market: The current price to place a market order to short-sell
- Ch-Short: channel short point
- B-dn: channel breakdown point
You can buy-to-cover based on:
- Market: The current price to place a market order to buy to cover
- Stop-loss: Stop-loss based on cost, default at 92% of the last short
- Take-profit: Take-profit based cost, default at 115% of the last short
- Ch-Cover: When the price hits the channel cover point
- B-up: When the price hits the breakup point, where you may want to clear out your position.
Automatic Trade is similar to Manual Trade. The major differences are:
- Trades are carried out automatically when reaching the channel trading conditions.
- It allows users to set limit orders at a certain price, and then carries out automatic trading.
It is recommended that you familiarize yourself with both manual trade and automatic trade mechanisms. Manual trading helps you establish a good sense of channel forming and market conditions. Auto trading keeps you in line with the underlying principles. You can practice both with similar stocks to see the outcomes and to help you establish trading disciplines.
Even though Earning Channel greatly simplifies investing strategy and trading tactics, we would like to remind you to practice hard, before you invest with real cash.
Good luck in your investments and trading!
The Earning Channel software, as well as the articles, tutorials and suggestions in the website and social media, are provided as tools and references to help users develop their own market analyses and make their own investment decisions. Users are ultimately responsible for the way in which they use this information to invest in the stock market. Nothing associated with the Earning Channel or the information presented in articles and tutorials should be interpreted as direct advice on buying or selling of securities.