As you know, the Forex market is prone to sideways movements. A sideways movement is a way for the market to consolidate before resuming its trend. Price breakouts can be achieved through consolidation.
But trading consolidation can be quite tricky. It requires careful planning and the ability to jump into the market at the right time.
The consolidation indicator MT4 is a great indicator for trading consolidation. It can be downloaded for free. This indicator is a copy of the Golden Rule at a glance. It uses Fibonacci channels to display them.
The indicator can be used to trade any currency pair, whether you are an experienced trader or not.
How to use the Channels indicator in trading
This indicator shows the eight lines that make up the channel. The coefficient of each line uses the Fibonacci value by default. You can change this value at any time.
The indicator shows the channels based on high or low prices. It helps to identify the beginning of a new trend.
The four channels are made up of eight lines.
The silver channel is the tightest channel.
Next is the sky channel, which is contained in the sky blue color.
The Zen channel is represented by the green line.
The future channel will be high in the magenta color.
The indicator does not provide any buy or sell signals. The lines can be interpreted by traders in the same way as Ichimoku. In order to identify market trends, you can use narrow channels. For price breakouts, wide channels are ideal for support and resistance levels.
This chart shows the price action of the British pound against the US dollar. The price is trading within the green Zen channel. Wait for the price of the Zen channel to reach a range of highs or lows. When the price reaches the channel high it is a good time to sell. Zen channel lows are a good level to buy and start going long.
Summing up
The consolidation indicator can be used to trade consolidation. The market range is 70% of the time. You can use the channel line within this range to indicate support and resistance areas to trade or wait for a price breakout. Although the indicator looks complicated, it becomes much simpler over time.
