by Peter Aan
Rules and Formulas: Channel systems use the highest and lowest prices in a series. Many possible
trading variations can be employed and the one I tested involves finding the highest high and lowest low
for the most recent n days. For instance, if you are using an 8-day channel you will examine the highs and
lows for the most recent eight trading days to find the highest high and the lowest low, which are the
reversal points. Buy/sell signals for an 8-day channel reversal are shown in Figure 1.
This test entailed two separate computer runs . One required the market only touch the channel high or
low on an intraday basis to reverse its position. The other run required a close above or below the channel
high or low to signal the reversal.