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Trends & Market Structure

What Is a Trend Channel

A trend channel is a trend line drawn under the lows of a rise, or over the highs of a fall, with a parallel copy on the other side, so that the price runs inside a sloping corridor. This paper shows you one drawn from gold's turning points in the autumn of 2024, the idea as a railway track up a hill, the channel on the daily chart, the two numbers that describe it, and how to shade it on your platform.

Difficulty
Intermediate
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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Two parallel lines

A trend channel is a trend line with a parallel copy on the other side of the price. Gold's lows of 5 August and 4 September 2024 — 2364.27 and 2471.85 — set the lower line, rising 4.9 dollars a day, and the 10 October low of 2603.40 landed four dollars above it. A parallel copy through the 20 August high of 2531.62 is the upper line, 114 dollars above the lower one. The highs of 26 September and 31 October ran along it, poking through by 22 and 4 dollars. Two parallel lines with the price running between them: that is the channel.

A railway track up a hill

The picture is a railway track up a hill. Two rails, the same distance apart all the way, climbing at the same angle, with the wheels running between them and touching one rail and then the other. The lower rail is the trend line under the lows, the upper rail is the parallel copy over the highs, and the price is the wheels. The rails do not stop the wheels. They show where the wheels have been running.

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