Channel Boundary Signals Using Proximity and Reversal

Summary

The document describes a signal engine for detecting when price approaches a channel boundary and then reverses away from the extreme. It distinguishes this two-stage condition from treating mere proximity as an entry signal. A state machine applies percentage-based proximity and reversal thresholds consistently, although the document does not specify their values or how they are selected.

The alert marks a possible inflection point: the boundary may act as support or resistance, or price may break through it. The signal itself does not forecast which outcome will occur, so it should be treated as an event notification rather than a directional trade recommendation. The method can be paired with any price channel; the author gives the Donchian channel as an example. No performance tests, asset universe, or trading rules for acting on alerts are provided.

Key ideas

• The engine waits for price to approach a channel boundary and then reverse by a specified percentage.
• A state machine applies the proximity and reversal conditions consistently.
• A boundary alert identifies a possible inflection point but does not predict direction.
• The boundary may hold as support or resistance, or price may break through it.
• The method is described for Donchian channels but can be used with other channels.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.