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MadMarketScientist

Channels Definition

By MadMarketScientist, in Trading Dictionary

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MadMarketScientist    11

MadMarketScientist
Posted

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.

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