Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Glossary

Channel

A trading channel or Forex channel is a primary method of technical analysis drawn as a pair of parallel lines that resembles a “corridor” or a “channel,” as its name states. These channels are used by analysts to determine an estimated area of stability within the fluctuations of an asset’s approximate price range. 

Creation of a Channel:

Visually, the trading channel is composed of two parallel trend lines consisting of a Support line, made from crucial low points on the chart, and a Resistance line that is made from crucial high points on the chart.  

Interpreting Channels:

  • A channel in an uptrend could indicate that demand is more significant than its supply. However, a break below the lower trend line (commonly seen with certain deviations) can be a sign of the channel breaking and should be considered as a signal to sell.
  • A channel in a downtrend could indicate that supply is greater than its demand. However, a break above the upper trend line (commonly seen with certain deviations) can be a sign of the channel breaking and should be considered as a signal to buy.
  • In general, if a trend line does not break the boundary of the channel wall, the trend would continue to follow its current direction in the market.
start-trade-promo-desktop

Put your knowledge into practice

Choose the financial instrument that suits you