Trend Channels

A trend channel wraps a trend. One line is the trendline through the lows or the highs. The other is drawn parallel through the opposite swings. A rising channel contains an uptrend. A falling channel contains a downtrend. The width is the typical swing size.

Both lines need two touches to be more than a sketch, and they should be parallel on the scale you are using. Parallel on a log chart is not parallel on a linear chart.

In a rising channel, the lower line is demand and the upper line is where rallies have been sold. A break of the lower line is the trend warning. A break of the upper line is acceleration, which can continue or reverse sharply.

In a falling channel, the upper line is supply. A break above it warns that the decline's slope has changed.

Trading a channel whose parallel side has only one touch, and widening the channel after every break so that price is always inside it.

Channels drift. The third touch is useful. The sixth touch is a crowd. When everyone sees the same line, the break or the overshoot becomes the trade, not the touch.