Diagonal Chanel Based Dimension Of Support and Resistance

Hello fellow traders

I believe that this thread and idea would be both useful for Forex related technical analysis and in fact even binary options based t.a.

My eyes were always good for finding random patterns and similarities, especially when it came to ratios. My view on technical analysis is that its a modern alchemy.

Anyway, have you ever thought - why can`t we have s/r lines at an angle instead of being horizontally straight ? And what will happen if we take more levels in consideration in a channel instead of simply the highest and the lowest ?

Well... I did.

I'm not sure if someone has ever brought up something similar to the general audience, and I have discovered the following myself while analysing charts.

I`m also sharing it with you fellow traders, In believe that together we could make something more efficient and effective out of the following Trend Channel S/R concept.

Take a look at the chart bellow for example :

1) There are visually noticeable channels
2) It seems easier to draw the trend line at the bottom since its a down trend/opposite for up trend usually (Drawing channels manually one line at a time will show you allot more than you could think)
3) Now we select the line (double click) and while holding Ctrl + C we draw it away, our trend line should be copied now.
4) We adjust it to the lowest low of our channel and extend it all the way to the left side of the chart (of course if the ray option is ticked in the tl options)
5) As we can see the following support trend line shows a property of our regular horizontal support and resistance line - its a turncoat
6) So what do we do next?We repeat the process, we copy our trend lines an try to fit them to the channel (looking towards correlation with the price - turncoat) as if our Chanel was a ranging market. We fit them at all OHLC points which look good.
7) Once we are done with that, our manual trend line channel should look like the second screen shot.

8) Now you have to sort out the appearance to make your life easier. For the sake of the following example I changed the color of our main trend channel lines to black. So... what does it give us? We have a range (from the highest black tl to the lowest black tl). Within that range we have a middle (amazing concept of polarity which I will explain a bit later). Even though we should only trade according to the trend you might still have a go at scalping it (if that is the correct term....)
The top three lines are our area of supply (resistance / overbought) and our lowest three black lines are the opposite - an area of demand (support , oversold ). (P.s. just now I have added the third black tl , I have missed it the first time).
As for the lowest purple lines? Well... I believe they could be used as the extra lowest points, if we get a close of a candle below those. Than our Chanel would be most likely broken.
Another nice thing which allows us to check if our Chanel was drawn correctly or not, is that in downtrend Chanel. The middle zone is a bit lower (the space from the middle zone of the channel to the lower zone of the channel is narrower than the space of the middle zone to top zone) In a downwards (bearish) channel. And the opposite works just as fine for up trending channels (bullish) which I will also demonstrate later.

9) Once we got that done, we can move on to changing the appearance of lines. What I usually do is set the middle line in the TOP and BOTTOM zones as dashed. Which simply indicates that its a possible bouncing of point in the BOTTOM and TOP zones. Therefore I would also recommend (and binary options traders should like that )- once again only going with the trend, but sell above the dashed line in the TOP zone, and buy bellow the dashed line in the BOTTOM zone. Doing so will increase your probabilities. As for the lines of the middle zone, I usually set them as the __ _ _ __ _ _ __ lines. Since its a middle point of polarity. But its not easy to predict whether the price will stop there or not, it looks nice however (to me at least) and it improves your understanding of the channel.

P.S. forgive me for not the best descriptions and not the best formating (I will do that later). Its my first time sharing my concept on forexfactory

Now the thing about polarity. Is you have the top, the middle and the bottom. The middle divides it in to 2 zones the top which is POSITIVE / +.
And the bottom which is NEGATIVE / -. The middle however is ZERO / neutral / 0.
So the concept when applied to technical analysis becomes and indication of bullish and bearish zones.
Perfect examples of the following I believe are the Bollinger Bands - you have 3 m.a.`s. And the zero line on OSMA or MACD.

I couldn't demonstrate it with candles since they look awful going at an angle. However a line chart might do it. The example bellow screenshoted and rotated -

Structure :

________________ Highest High \
------------------------- Lower High l TOP ZONE
________________ Highest bullish close/bearish open /

Positive Polarity Zone - Bullish

---- ---- ---- ---- ---- Highest high from negative zone/Lowest close from Positive zone.
---- - - ---- - - ---- - - --- Lower highs from negative zone/ lower closes from Positive zone.
---- ---- ---- ---- ---- Highest bullish closes and bearish opens from negative zone/lowest lows and bearish closes or bullish opens.

Negative Polarity Zone - Bearish

________________ Highest High from the zone/ bullish open or bearish close from the negative zone
------------------------- Lower lows from negative zone/ bullish opens and bearish closes from TOP ZONE
________________ Lowest bearish closes or bullish opens / lowest lows

P.S. the thread is still in construction. Mistakes or not the best formating are possible

But please do already share your opinion and constructive criticism

Hi MaxenshteinD

You have too many lines, which can become confusing, at least for me.
I trade simple price channels like this.

Good luck with your thread

Thanks
The main idea of the methodology of so many lines is basically to achieve the following :
1) The ability to understand the market structure allot better
2)To manage trades more precisely and accurately and also get rid of grid/fear/etc and replace them with pure precise plan of the possible behaviour of price in the future.
3) It makes things more interesting especially when trading above 4h

However in general its just nice to see those lines and acknowledge them, their strength grows from middle to top, and middle to bottom. So speaking about your example, you have drawn only the strongest lines.

gbpusd idea

eurusd

on h1 we have also a minichannel orange line

I see you understand the idea )))!
This is exactly what I meant. So what do you think about this concept?

eurusd and pivots

While attempting to draw lines on GBPUSD Weekly I realised that the same mistake as with horizontal lines could be easily done - the chart might get too clustered with s/r trend lines.

So I guess the solution would be just as with horizontal s/r lines, to keep only the most important ones with respect to the one time frame higher, current and one lower.
Its all because of the fractal structure of the market .

usdjpy D1

and pivot

audusd D1

canal and pivots

Everything would also look allot better and clearer if we managed to find an indicator which would allow us to draw rectangles at an angle. Basically just like the regular shaded rectangles, but diagonally instead of horizontally. The only work around I have found unfortunately was to create a diagonal rectangle out of two separate triangles. Which is definitely not something anyone would willingly do for simple technical analysis due to the difficulties.

Well, a possible solution would be to just fill the areas manually with really fat trend lines.
The colours should also be pale, because with all of those details on a highly contrasted chart, loosing eye sight wouldnt be hard.

Looks easier on the eye and more cheerful to me
Once again the lighter colours are at the bottom of the colour palette, and to copy the trend line or any object in mt4 you just double click it, and while holding Ctrl + C drag it way which duplicates it.