Price Action: Trading Broad Bull Channels (Part 1)

Broad channels share many characteristics with trading ranges,
and they frequently contain trading ranges.
If you switch to a higher time frame chart,
you will find it is usually a tight channel.
A broad bull channel contains many trading ranges.
In fact, much of the time
it is difficult to tell whether it is a trading range or a broad channel.

You see the market continuously making higher highs and higher lows.
Pullbacks sometimes last 10 bars,
so this is a broad bull channel.

To identify a broad channel,
you usually need at least 200 bars or more,
because each leg up or down typically lasts 10 to 20 bars,
and to conclude it is a "broad channel,"
you usually need to see three legs.
This means you need to observe at least two hundred bars.
But when you trade, you are only watching the current 100 bars,
so you only need to trade the structure you see in front of you.

The wider the channel and the deeper the pullbacks,
the more traders tend to trade it like a trading range.

An important point about broad bull channels:
They sometimes produce bear legs
strong enough to put the market in an "Always In Short" state,
even though these bear legs are still within the broad bull channel.

It is a bull trend, and you must give it a definition.
It is not a strong breakout, nor a tight channel,
so we call it a broad bull channel.

A strong rally makes a new high.
Then this low becomes very important.
I would call it a major low.
If the subsequent pullback drops below this low,
the market is no longer a bull trend
but has entered a bear trend or trading range.
Therefore, when the market is rallying,
pay special attention to major higher lows.

If it is a trading range,
it will often drop below the low and then reverse up,
but only when price breaks above a major lower high
is it considered to be back in a bull trend.

To emphasize again:
Major higher lows mean the market is in a bull trend or a trading range.
Once it drops below these lows,
it enters a bear trend or trading range.
But if it subsequently breaks above a lower high formed from a major low,
then it is back in a bull trend or trading range.