| || What is the definition of Channels? |
Channels are technical ranges of support and resistance in which a currency pair has traded in for a period of time.
| || TradersLaboratory decodes Channels |
Channels can be used in technical analysis to predict the range at which prices will peak before retreating, and the range at which prices will fall before bouncing up. Channels can form in an uptrend (ascending channels), in a downtrend (descending channels) or in a consolidation (horizontal channels). The pivot points of S1, S2, S3, central pivot, R1, R2, R3 all form horizontal channels which can be used to range trade at various price levels. A break of a channel on the upside is a buy signal, and a break of a channel to the downside is a sell signal.
A channel tool exists as a technical indicator: the Donchian Channel.