Trader Skills #12: The Bear Channel

Ah my old friend.

You were there when I removed money from my account again and again.

What makes you so persistent?

Ways to trade a Bear Channel

– Follow the breakout and catch a second leg

Follow the breakout, look for a good signal to enter

– Wait for any 2nd reversal to fail

Wait for 2 reversal attempts to fail – look how they like to travel in pairs

– Reduce the timeframe to 2min (turn into a wider channel to see gaps / BO point tests. Yesterday gaps were decreasing and then increased again! So watching gaps is a valuable strategy

2min Chart, look for 2nd entries to give you confidence to hold short on the 5min

– Trade spike breaks (test back to the BO point of a tight channel. This means a trader could have sold at the break and higher and made money until the trend ended – which is where you have to take a loss and switch – recovering your loss and making a profit on your final long trade.

– Take every good entry – especially 2nd entries, near the MA – it should hurt a little.

– Wait for the stop entry to trigger and get follow through, then try to enter at that price again

Many fills for Bears, Bulls not so lucky

– Keeping adding small positions and be mindful where the last protective stop is for your guide on when to start closing

Moving Stops Down, don’t reverse until the other sides stops get hit!

– Go up a timeframe (15min) and trade the MM targets there

15min BR Spike – Two reversal attempts – MM Down

What is it about the bear channel?

– On ES, which is a stock index which is made up of the most successful companies in the USA, it has never been in a bear trend. Take a look at the yearly chart. So by definition, bear channels will be appear the least for ES traders. Credit for Ali Moin-Afshari from Quant Systems for that great nugget!

Practice Suggestions

– I hope you found some of this useful for your own price action study.

– Practicing the above techniques each day will build muscle memory you can likely call on when trading live.

– Please comment below if you want more details.