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Technical Indicators & Overlays

Computerized Investing > First Quarter 2010

Trading Channels

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In the last two installments of Technically Speaking, we covered support and resistance lines and trendlines. This time around, we will discuss trading channels, which bring together the elements of trends and support and resistance.

A trading channel—or trending channel, as it is sometimes called—is defined as the area between two approximately parallel trendlines, and it is typically taken as a measure of a trading range. The upper trendline connects price peaks and the lower trendline connects lows. Channels are a popular tool of short- and intermediate-term traders, not long-term traders or investors.

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John from CA posted over 7 years ago:

What would be the better time value to set-up chart; monthly,weekly,daily,60 min.; etc.?

James from LA posted over 7 years ago:

I use a 30-period, 3 linear regression above and below the mean as an indication of overbought/oversold as well as the probability of reversal. It seems to work extremely well.

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