M4 · Part 1 — Continuation patterns · Lesson 30/144
6 min 45 XP
A channel is a trend whose highs and lows ride two parallel lines. An ascending channel climbs between a rising support (lower rail) and rising resistance (upper rail). A descending channel falls between two declining rails. A horizontal channel is just a rectangle. The channel shows you both the trend and the rhythm inside it.
You trade a channel with the trend, inside the lane. In an up-channel: buy near the lower rail (support), take profit near the upper rail, stop just below the channel. In a down-channel: sell near the upper rail, cover near the lower. You are buying dips and selling rips, but always in the trend’s direction — never fighting the lane.
The break of the channel is the real event
Channels do not last forever. A close beyond the rail AGAINST the trend — below an up-channel, or above a down-channel — is an early warning the trend is weakening, often the first clue of a reversal. The break of the lane changes your whole bias.