What the stock market guru did not tell you

Most stock market gurus tell you that stock market is very complex game. They make everything very complicated. However, earning from the stock market is not that difficult, if you know certain simple things.

Simplicity is the key

It is OK to study different oscillators, indicators etc. but while trading you have to rely on most reliable pattern only. The simplest and most reliable pattern which any one can understand is "channeling pattern" sometime known as "rolling pattern". If you trade by considering only the channeling pattern then within short time you will build significant capital from stock market.

What is channeling pattern?

Channeling pattern is a pattern formed when particular stock moves between two parallel trend lines. If you are in a stock market for some time then you must have heard of two terms 'support' and the 'resistance'. Support is refer to the lowest point in the chart after which stock started moving upward and the resistance is the highest point in the chart after which stock started to move downward.

If you draw a trend line between minimum two consecutive resistance and the support points and if you get the parallel lines then it is said that that stock is channeling.

Stock remains in a channel for few days, few months or even for few years. However any stock can not be moving in a channel for indefinite time. Sooner or latter the channel breaks and new channel forms.

The channel becomes more reliable when a particular stock moves more in a channel and many time touches and rebound from the resistance and support line without breaking it.

Types of channels

According to the properties channels, they are divided in to three types.

1. Rising or ascending channel
2. Declining or descending channel
3. Horizontal or steady channel

Rising or Ascending channel

When a stock moves in a channel making consecutive higher highs and consecutive higher lows, then it is in the rising or ascending channel.

(Graph: www.chart.nu)

Declining or Descending channel

When a stock moves in a channel making consecutive lower highs and consecutive lower lows then it is in the declining or descending channel

(Graph: www.chart.nu)

Horizontal or Steady channel

When a stock moves in a channel making steady highs and steady lows, then it is in the Horizontal or steady channel.

(Graph: www.chart.nu)

How to trade using channel

There are several ways you can trade the channel. Depending on your preferences, you can select any method you like.

One of the most successful trading ways is trading in the same direction. In this method buy when stock begins to rise in a channel and sell or short when stock begins to fall or decline in the channel.

There are minimum chances of failure if you follow this basic principal of buying only when stock rebounds from the support level and sell only when price rebound from the resistance level. Also see that the channel must have at least two resistances and two support level, if these criteria is not met then that channel is consider as Not tradable.

How to find the channel

It is very easy to trade and make money from trading the channel but it is very difficult to find the channel. Yes, out of thousands of stocks there are only few stocks that are moving in a channel in a given period of time. Analyze manually each stock and drawing two trend line to see whether stock is moving in a channel is if not impossible very very time consuming and boring.

Easy way to find channel

If you are like me who don't want to analyze each stock to find whether it is moving in a channel or not then here is a cheap and best solution. Visit Stock Market Killer with introductory offer of only $5 you will get 10 stocks per week that are moving in a channel.

Procedure to trade using channel

With Stock Market Killer the procedure is very simple. Depending upon your preferences, select the stock or stocks from the 10 stocks given by Stock Market Killer and find out the position of your chosen stock in the channel. You can enter the trade after the rebound or wait for the rebound. Some may wait for the break out. But when you enter after the break out be sure that it is not the false break out. Taking the wrong position after the break out is very common.

Stop loss

It is very important to add simple or trailing stop loss immediately after entering the trade. With channel trading stop loss strategy is also very simple. When you are buying a stock at support level then put your stop loss slightly below the support level. Similarly when you are selling at resistance level, put your stop loss at slightly above the resistance level.