In technical analysis, channels are another tool that traders use to determine the point at which to enter the market. Channels are fundamentally linked to trend lines, as each channel is created by drawing a parallel line at the same angle of the uptrend or downtrend. In addition, channels are directly associated with support and resistance levels, since the two lines that create a channel represent exactly these levels.


As shown in the chart above, there are three types of channels:

  • Ascending channel: Defined by higher highs and higher lows
  • Descending channel: Defined by lower highs and lower lows
  • Sideways channel: Ranging highs and lows

As with support and resistance levels, channels can be used to detect the direction in which an asset’s price is likely to move. In addition, they help traders determine the points at which to enter or exit the market.

See Trading Support & Resistance

Did you know?

U.S. President Richard Nixon is credited with enabling a free-floating currency system after ending the Bretton Woods Accord.

Word of the day
"Risk Aversion" - The reluctance or unwillingness to take what are considered to be risky positions.
Pro Tip

It’s usually better to avoid trading when market activity is low.

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