Price channel
Shows the direction and strength of the local trend; the channel boundaries are dynamic levels for trading👇
Channel designation on the chart
The indicator automatically draws the current price channel within which the price moves:
Red channel - downward local trend
Green channel - upward local trend
Yellow channel - sideways movement, market equilibrium
The steeper the slope — the stronger the trend💪
Using the Channel in trading
The price channel is often used as a trend area from which the price can bounce, since the price can remain within the channel boundaries for a long time:
The lower boundary acts as support where the price can find a foothold — at this moment consider buy trades
The upper boundary of the channel often acts as resistance where the price can slow down or reverse — at this moment consider sell trades
The central line works similarly and also acts as support and resistance
Use the channel direction to filter out false signals against the trend
First of all, try the simplest strategy with a price channel from the indicator developer
The example shows how the price slows down as it approaches the lower boundary of the channel, then a reversal follows. Similarly, we see how the price reacts from the upper boundaries of the channel.
A safe option — in a downward channel trade from the upper boundaries in continuation of the bearish trend.
The example shows how the price slows down as it approaches the lower boundary of the channel, then a reversal follows and further continuation of the upward trend
A safe option — in an upward channel trade from the lower boundaries in continuation of the bullish trend.
The example shows how the price slows down as it approaches the central boundary of the channel, then a bounce and continuation of the impulse follow, and when the price broke through the central line — it became resistance.
The channel width is used to assess volatility:
Wide channel — high volatility and a strong trend
Narrow channel — weak trend or price consolidation
When the channel narrows, the price consolidates — it is stretched like a spring. This indicates a strong impulse in the near future. Often the direction of the impulse marks the beginning of a strong trend.
The example shows that the channel width equals 52% of the net movement, indicating high asset volatility.
The example shows that the channel width is only 2% of the net movement, indicating low asset volatility and its consolidation.
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