the hAndbook of technIcAl AnAlysIsFortunately, the situation improves once a strong trend is present. Figure 12.25 de-
picts a buy signal in Tesla Motors in November 2012. There was no subsequent sell in-
dication even through September 2013. A trader would have gotten in at around $40
and could ride the trend all the way up to $166.97 without any exit signals being issued.
Some traders opt to exit with a more responsive lower band, that is, with a
shorter lookback period or via a different technical exit. Here are a few popular
exit mechanisms typically applied to price channels:
■ (^) For long entries, exit with a more responsive lower band, with periods ranging
from 2 to 10 periods, depending on the degree of responsiveness required (see
Figure 12.26).
Figure 12.26 A Price Channel with Relatively Faster Long Exits on the Daily Nikkei
225 Chart.
Source: MetaTrader 4
Figure 12.25 Price Channels Working Effectively in Strong Trends as Seen on the
Daily Chart of Tesla Motors Inc.
Courtesy of Stockcharts.com