The iStdDev – Standard Deviation Channel Forex Indicator shows the possible pullback areas and key support/resistance levels of the price.
The idea of applying the Standard Deviation Channel in financial trading is quite common. It plots a set of straight parallel lines based on the recent market high and low. Traders used to closely observe how the price reacts near these levels to determine highly probable buy/sell signals.
Besides Forex trading, you can also apply the iStdDev – Standard Deviation Channel Forex Indicator for stocks, commodities, and cryptocurrencies.
The blue line at the bottom of the channel shows the ultimate support zone. The three green parallel lines in the middle represent key event areas of the market. We’ll only look for buy signals when the price denies moving below the blue support line of the channel.
According to the above example, we’ve decided to go long once the price rebounds from the ultimate support line and breaks above the immediate resistance. Once you enter long, set the SL below the blue line at the bottom. Also, consider taking profits once the price hits the blue resistance line at the top of the channel.
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As you can see in the above example, the direction of the price channel indicates the price is already in a downtrend. Besides, the price rejecting the ultimate resistance at the channel’s top suggests the market is respecting the current bearish momentum.
So, we can activate the sell order once the price breaks below the immediate support. Place the SL above the blue resistance line. Additionally, hold your short position until the price hits the ultimate support line at the bottom of the channel.