The Automated Channel Trader built for NinjaTrader7 was developed based on a publication in the Journal of Futures.
A study was done on the viability of channel trading, as well as the best methods for using channels for swing trading.
Upon further investigation to the best practices for entering, managing and exiting positions we've put together a solution to automatically follow these rules.
We've gone ahead and modified the strategy to encapsulate the trading range into a channel based on a bell curve, rather than using classical high/low points of contact in order to draw the lines.
Here are the rules of the system:
Identify the 3 and 4 standard deviation zones of price action development.
Only allow the system to trade if the current channel is rising.
Price action must have created swing support.
Within the last x bars, price had crossed below the 3rd standard deviation of the lower channel.
The latest price is above the 4th standard deviation.
The latest price crosses above the high of the previous bar, indicating buyers have overcome the sellers.
Stops are then places below the prior swing low point and automatically re-adjusted as new swing low points are created by price action.
The system will emergency exit if price closes below the lower 4th standard deviation level.
Profits are taken on a trailing swing stops.
You can find the Market Replay results below.