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Channels

A channel is like consolidation that is moving up or down.

To create an up (ascending) channel, simply draw a parallel line at the same angle as an uptrend line and then move that line to position where it touches the most recent peak.

To create a down (descending) channel, simple draw a parallel line at the same angle as the downtrend line and then move that line to a position where it touches the most recent valley.

When prices hit the bottom trend line this may be used as a buying area. When prices hit the upper trend line this may be used as a selling area.

Channels

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A trading channel occurs when the market is trending but seems to stay within a channel.

Trading Channel

Trading Channel

The lines of support and resistance are not horizontal, but this is still consolidation. We trade from support to resistance. The channel can also be very steep.
trading channel

trading channel

It is important to draw the trading channels on your charts and keep an eye on them. They will show you when to expect a trend reversal. Also, pay attention to when the candles break out of the trading channel.

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