Trend Channels

Trend Channels  provide general direction to trader and investor. Trend Channels  are commonly used as an indicator for entry and exit prices.

Another important use of trend channels is that when prices reach the main trend line of a channel, its is usually interpreted as a potential end for that zig and should zag away to the other line of the channel.

Trend Channel are also good indicators for a new change in direction. When the prices breaks outside one of the trend lines, it could be expected a change in that direction. Consecutively that price point were the break occurs could be used as  support or resistance.

Drawing a trend channel it is rather easy. The first step is to draw a line along the base of the price in an uptrend or above the top of the price in a down trend. Next, draw a parallel line in the opposite of the price in the top or bottom part of the higher or lower price.

 

trend_channel

trend_channel

 

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