Forex technical analysis: drawing and use of channel lines
An upward or downward channel formed by drawing a parallel line along a support line or resistance line is often referred to as an upward or downward channel. The trend is the basis for long and short positions, while the rising and falling channels are the basis for closing and holding positions. The longer the channel line has not been broken and the more times it has been tested, the more important it becomes, and it can be regarded as a trend line. At the same time, when the important trend line is broken, it means that the trend may turn. But the important channel line is broken, it may be that the upward and downward trends are accelerating, which is the basis for overweight shorts; similarly, we can also use the price point to reach or break through, and use the channel line to determine whether the trend is increasing or Weaken, and pay attention to changes in its trend.
Channel is another commonly used tool in technical analysis, it can determine the best bid or ask price of the price. The top and bottom of the channel represent potential resistance or support areas.
The way to draw up the channel is to draw a parallel trend line at the same tilt angle on the basis of the existing up trend line, and move the line until it touches the nearest high point. While you are drawing the upward trend line, you should be able to draw the upward channel.
The way to draw down the channel is to draw a parallel trend line at the same tilt angle based on the existing down trend line, and move the line until it touches the nearest low. When you draw a downward trend line, you should be able to draw a downward channel.
When the exchange rate touches the trend line below the channel, the area will provide a good buying opportunity; and when the exchange rate touches the trend line above the channel, the region will provide a good selling opportunity.
There are three types of channels:
- Ascending channel (the high point keeps rising and the low point keeps rising)
- The descending channel (the high point keeps decreasing and the low point keeps decreasing)
- Horizontal channel (interval fluctuation)
Important points that the trend line should remember:
- When constructing a channel, both trend lines must be parallel to each other;
- In general, the bottom of the channel is regarded as the buying area, while the top of the channel is regarded as the selling area;
- Don’t force the exchange rate to be kept inside the channel you drew. One of the boundaries of the drawn channel is inclined in one direction, while the other is inclined in the other direction. This is incorrect and may lead to the failure of the transaction.