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Computerized Investing > First Quarter 2010

Trading Channels

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by AAII Staff

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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