Forex Trading Price Channels

Forex Trading Price Channels are the lines that are drawn in the chart to represent the trading range of a currency. The price of the currency has been trading over a fixed period of time in this range. Creating of channels in the chart is very easy and Fxstay traders wrote useful article you learn about Forex Trading Price Channels.

How To Create Forex Trading Price Channels In The Chart

Look at the chart. Notice the higher points and the lower points in a fixed period of time. Draw an upper line connecting the higher point trading prices of a currency; this is the upper trend line. Draw another lower line connecting the lower point trading prices; this is the lower trend line. Buying area is represented when the prices hit the bottom trend line and selling area is represented when the prices hit the upper trend line. The area covered between the upper trend line and the lower trend line is the channel formed. You can see an example of a channel in the figure below. The upper trend line and the lower trend line forms a channel in the portion of the chart. The trend lines are indicated by the red thick slant lines.

Forex Price Channels

Forex Trading Price Channels

You can create a channel for any time period you like. For example, if you are visualizing a short term period then you can create a channel for less than three weeks, if you are visualizing medium term period then you can create a channel for time period between three weeks to six months and if you are visualizing a long term period then you can create a channel for more than six months. Constructing channels is very important because if channels are not properly constructed then you will see most of the trading outside the range, Forex trading price channels help you alot to make money in your real Forex account .

Channel Breakout
If the price of a currency crosses the upper trend line then it is a channel breakout at upside or upwards channel breakout. On the other hand, if the price of a currency goes below the lower trend line then it is the channel breakout at downside or downwards channel breakout. An upward channel breakout is shown in the figure below. The circled area in the figure indicates the upward channel breakout.

Forex Upward channel breakout

Forex Upward channel breakout

A downward channel breakout is shown in the figure below. The circled area in the figure indicates the downward channel breakout.

Forex Downward channel breakout

Forex Downward channel breakout

It is important to understand that every crossing point is not a true channel breakout. Channel breakouts exist only when crossing points form a trend. If the price of a currency crosses the uptrend line or downtrend line only once and then returns into the channel then these are called false breakouts. Traders and investors should avoid themselves acting on the false breakouts.

So study of channels is an important part in the Forex Trading. Sometimes channel breakouts can also form a new channel so constant analysis is required by the traders and investors.