Choch, short for Channel Offset, is a technical indicator used in forex trading to identify potential trend reversals or breakouts. It is a custom indicator that is not commonly found in trading platforms, but it can be easily created using the MetaTrader 4 (MT4) or MetaTrader 5 (MT5) software.
Choch is a type of volatility-based indicator that uses both the high and low prices of a currency pair to determine its upper and lower bands. These bands are then offset by a certain percentage to create a channel around the price action. The offset percentage can be adjusted based on the trader’s preference or trading strategy.
The formula for calculating choch is as follows:
Choch Upper Band = Highest High * (1 + Offset Percentage/100)
Choch Lower Band = Lowest Low * (1 – Offset Percentage/100)
The highest high and lowest low are calculated over a certain period, usually 20 candles, and the offset percentage is typically set to 1% or 2%. This means that the upper and lower bands will be offset by 1% or 2% from the highest high and lowest low, respectively.
When the price action is within the channel created by choch, it is said to be in a range-bound market. Traders can use this information to identify potential support and resistance levels, as well as to look for trading opportunities within the range.
However, when the price action breaks above or below the choch channel, it is considered a potential trend reversal or breakout. Traders can use this signal to enter a trade in the direction of the breakout, or to exit a trade that is no longer profitable.
It is important to note that choch should not be used as a standalone indicator. It should be used in conjunction with other technical indicators and analysis tools to confirm trading signals and to avoid false signals.
One of the advantages of using choch is that it can be used on any time frame, from the 1-minute chart to the daily chart. This makes it a versatile tool for both short-term and long-term trading.
In addition, choch can also be customized based on the trader’s preference. For example, a trader can adjust the offset percentage to make the channel wider or narrower, depending on the volatility of the market.
Overall, choch is a useful technical indicator for forex traders who are looking for a tool to identify potential trend reversals or breakouts. It can be easily created using MT4 or MT5, and it can be customized based on the trader’s preference. However, it should be used in conjunction with other analysis tools to avoid false signals and to confirm trading signals.
