Turtle Channel Strategy for Binary Options
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Turtle Channel Explained
Take a wild guess what Turtle Channels are all about… No - It has nothing to do with a tortoise. Care to take another guess? The Turtle Trading System has become one of the most famous stories in trading history. It was originally a commodity trading system created in the 1970’s by the famous Richard Dennis and William Eckhardt. They taught their system to a group of average and random people in Chicago. They managed to turn most of these people into profitable traders. Their success has stirred the interest of many new and veteran traders alike. This caused Richard Dennis to become one of the most popular commodity traders of all time. Their strategy is the complete inverse of the so called "buy low and sell high" methodology. The system that they used relied on breakouts of historical highs and lows to enter and manage their trades. What made this method out of the ordinary was the fact that they would accept numerous small losses while waiting for a big move in their favour. By using the correct money management they were making profits from 38% up to 124%.

What Exactly Are Turtle Channels

The group of traders, known as "The Turtles", were sworn to secrecy. While it appeared to be a well-kept secret, there was a trader called Curtis Faith who revealed the original trading rules. Thanks to him channel breakout strategies were growing in popularity in the 1980s. Now lets get on to what Turtle Channels actually are. They are basically indicators that draw trading bands on each side of the price of an asset. These bands act as dynamic support and resistance levels. Some traders like to use Turtle Channels as an indicator to let them know when a pair is becoming overbought(top band) or oversold(bottom band). Other traders believe that when price breaches the upper band of the channel, it is a warning that upward momentum is increasing. Where on the other hand, when the market pushes through the lower band, it is a sign that it wants to go lower. At the end of the day you must choose which one works better for you.

How Turtle Channels Are Calculated

The bands or channels are created by taking the highest and lowest prices of an instrument over a certain period of time. This time can be set to any amount that you wish to use. It all depends on what your goal and trading style is. The general rule of thumb is to increase this number if you want to trade longer term. We on, the other hand, will have to decrease this number to use it on smaller time frames for Binary Options purposes.

How Can I Apply This To My Trading

A very important point to make before we start is that Turtle channels are not a lagging indicator like the MACD, moving averages or any kind of oscillators. So you are all probably wondering how this indicator can be useful for your Binary Options trading. Let me explain to you how I use them in my trading plan. You should keep in mind that this indicator can be traded in many different ways.

Metatrader indicator for Turtle Channels

As always, MetaBinaryOptions is offering you a free Metatrader indicator for helping you apply this strategy.

Click here to download the indicator 100% free

This indicator will automatically plot Turtle Channels on your chart to indicate historical highs and lows, also known as overbought and oversold levels. We have modified the indicator so that is only shows the top or bottom band to make it easier to trade with.

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Figure 1 – Turtle Channels indicator

Turtle Channels make our life as a trader much easier to spot trends in the market. If we look at the picture below in Figure 2 we can clearly see a downtrend when the red band is above price. Same goes for the green band that is under price in the uptrend. We can see that when price breaks the upper or lower band that the trend has changed in the other direction. When this happens we must look for pullbacks to take trades with the trend. The great thing about this indicator is that it keeps us on the right side of the market more often than not.

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Figure 2 – Turtle Channels trading example

Our first strong signal occurs at our first arrow. The market is in a downtrend so we should be looking to only take sell trades. Price moves up in to our previous high and touches the red band(overbought level). You also could have added our Value Chart indicator or Fibonacci Retracements for extra confirmation to take this trade. Ok so now we see, on the 19th of August, that the market sentiment has changed because it broke the top band. I have discovered that the most powerful trades happen on the first pullback to the fast or slow band after the trend has decided to change direction. This is exactly what our second trade was based on. If you wanted some confirmation you could have taken a call trade after the bullish engulfing candle appeared.

Turtle Channels Summary

The next time you hear traders mentioning or discussing the "Turtle Channel" you can actually join in on the conversation. You now have the background and knowledge regarding this indicator. When applying this indicator it is of utmost importance to find what works with your trading style! This should give you an edge next time you look to execute your binary options trades. Until next time - enjoy the smarter, more educated version of yourself. Remember, Knowledge is Power, even when it comes to trading.
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