# Chapter 8, Part III. Channels. Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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1. ### Sive Morten Special Consultant to the FPA

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UP CHANNEL

Here in the #1 Chart is an example of anascending channel:

You can see that the difference between two nearest tops and bottoms are almost the same – the market is forming new highs and new lows with equal amounts of price movement to the upside. Due to this movement, lines that link tops and bottoms are parallel, i.e. have the same speed and angle.

Now I suppose you understand what “Higher highs and Higher Lows” term means. In general to build an up channel:

1. Draw an uptrend, according to rules, that we’ve pointed out in the previous lesson (trend lines);

2. Clone it – draw another one with the same angle (parallel), adjust it’s length to the length of potential channel;

3. Drag it to the most recent high;

4. If this is really an ascending channel – then all previous highs should lay with solid accuracy on dragged line (see chart #1 – although there is some divergence of tops from the line – still they are very close to it, as are the lows).

5. Don’t fit it forcedly to market action!

DOWN CHANNEL

Here on the #2 Chart is an example of descending channel:

Here again you can see that difference between two nearest tops and bottoms are almost the same – market is forming new highs and new lows with equal amount of price move to the downside. Due to this moment lines that link tops and bottoms are parallel, i.e. have the same speed and angle.

Now I suppose you understand what “Lower highs and Lower Lows” term means. Here is an algorithm how to build down channel:

1. Draw a downtrend, according to rules, that we’ve pointed in the previous lesson (trend lines);

2. Clone it – draw another one with the same angle (parallel), adjust its length to the length of potential channel;

3. Drag it to most recent low;

4. If this is really descending channel – then all previous lows should lay with solid accuracy on dragged line (see chart #2).

5. Don’t fit it forcedly to market action!

#1
Lasted edited by : Feb 12, 2016