7 Points to Remember while using Price Channels

7 Tips while using Price Channels

1. Price channels are the price zones drawn on the chart, to reflect the potential future price points of the current trend by creating two trend lines parallel to each other. One is the trend line, and another is the channel line parallel to it which is drawn by connecting the high and low of the latest price swings.

2. A bullish channel is a price channel built by two parallel ascending diagonal lines; one connects the higher high’s and another connects the higher low’s, which start from a lower price point and continues on advancing diagonally until the price action respects both the upper and lower trend line.

3. A bearish channel is a price channel built by two parallel descending diagonal lines; one connects the lower low’s and another connects the lower high’s, which start from a higher price point and continues on declining diagonally until the price action respects both the upper and lower trend line.

4. A sideways channel is a price channel built by two parallel horizontal lines; one connects the price points of similar swing high’s, and another connects the price points of similar swing low’s, which continues until the price action respects both the upper and lower trend line.

5. The perfect price channel is always built by 2 trend lines parallel to each other.

6. Sometimes prices may not perfectly follow the price channel and might penetrate through the trend lines, but they should not close in the opposite direction of the price channel i.e. a price channel is a trend channel, which indicates a rough idea of resistance and support levels as according to the speed of trend.

7. Do not ever force the price channel to adjust according to the price action. If the price action is not respecting both the trend lines parallel to each other, then it is not a valid price channel.

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