Types of Trend Channels.

There are three types of channels:

1. Ascending channel (higher highs and higher lows)
2. Descending channel (lower highs and lower lows)
3. Horizontal channel (ranging)

Some traders prefer to use the terms “rising channel” for an ascending channel and “falling channel” for a descending channel. Most likely, Millenials.

Important things to remember about drawing trend channels:

When constructing a trend channel, both trend lines must be parallel to each other.

Generally, the bottom of the trend channel is considered a “buy zone” while the top of the trend channel is considered a “sell zone”.

Like in drawing trend lines, DO NOT EVER force the price to the channels that you draw!

A channel boundary that is sloping at one angle while the corresponding channel boundary is sloping at a different angle is not correct and could lead to bad trades.

When this happens, this chart pattern is no longer a trend channel but a triangle. (which you will learn about more later).

That said, trend channels don’t have to be completely parallel. Nor does 100% of price action have to fit within the channel.

A common mistake many traders make is that they only look for textbook price patterns.

They miss important information about price action and close their eyes to other important clues.

Notice the channel drawings below…

Do they look perfect?

Waiting for picture-perfect textbook examples won’t help you in the real world because it’s going to be pretty rare to see price action that fits perfectly within two perfectly parallel trend lines.

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