Channel

For illustrative purposes only, not a recommendation.

Description

The channel is a combination of two parallel lines: the trendline and the channel line. Recognizing existence of the channel might be crucial to the analyst as prices often remain within the same channel, while breaking out of the channel can predict change in trend.

In uptrend conditions, it is common for the trendline to be plotted across the lows, and the channel line is plotted from the first significant peak. It is said that the channel exists if the next rally reaches and bounces back off the channel line. Conversely, in downtrend, the trendline is plotted across the peaks and the channel line is plotted from the first prominent trough. Going back up from the channel line after the next drop might signify existence of the channel.

In both uptrend and downtrend, failure to reach the channel line might indicate that the trend line will be broken and the trend will get weaker or reverse. Conversely, breaking the channel line might be considered amplification of the current trend.

Just like the trendline, the channel allows you to view a label showing its principal parameters. These parameters are: the length of the channel (as expressed in both number of bars and time units such as days, hours, minutes, depending on the timeframe you are using), the price change correspondent to the difference between the start and end points of either line (expressed in both dollars and percentage), its slope, and its height (the distance between the line expressed in both dollar and percentage values).

In order to add the channel to chart, choose it from the Active Tool menu. Specify two points that will define the slope of the trendline. The trendline will appear on chart. At the same time, the channel line appears: move it to desired location and left-click so that both lines are fixed.

Properties

Begin point:

• Value. Defines the price value corresponding to the begin point.

• Date/Time. Defines the time scale value corresponding to the begin point.

End point:

• Value. Defines price value corresponding to the end point.

• Date/Time. Defines the time scale value corresponding to the end point.

Height:

• Height. Defines the distance between endpoints of trendline and channel line. This distance is measured along the price scale, i.e., in dollars. Negative values signify that the channel line is below the trendline.

Channel curve properties:

This section allows you to add extra parallel lines to the channel. These can be located within the channel and outside it. By default, three extra lines are added (but hidden), however, you can add as much as you like by pressing "Add Curve Button".

• Visible. Defines which of the extra lines should be visible.

• Coefficient. Defines the distance between the extra line and the trendline. This distance is equal to the channel height multiplied by the coefficient.

• Color. Defines the color of the line.

• Style. Defines whether the line should be plotted as solid, long-dashed, or short-dashed.

• Width. Defines the line width in pixels.