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CHANNELS
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2 1 — There should be at least 4 touches, 2 on the

bottom 2 on top. Technically the pattern should be
viewed as neutral as price can break up or down,

Channel height
but trading the break in the overall trend direction
yields better results.

— Looks for an increase in volume upon the

breakout.

1) For price targets take a measured move of the

parallel channel and add the distance to the
breakout direction.

TP1
2) In this example we are shorting the top of the
channel with a partial rise and a TP1 at the bottom
of the channel. If price breaks to the downside we
move SL to mid point of the channel and TP2 is the
measured move. For a maximum price target for a
TP3 measure the length of the parallel channel and

Channel height
extend it vertically above the channel in the
direction of the breakout.

TP2
CHANNELS
PARALLEL CHANNELS/ RECTANGLES
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I will generally trade a channel from bottom to top, or top to bottom with a take profit set at the mid
point of the channel. I like to take 50% profit at the mid point and move stops up to breakeven. I will
compound the trade if there is a close above the midpoint.

CHANNELS
DAY TRADING CHANNELS
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Price closes back under the resistance line, which
indicates the resistance is holing and one could
short to the middle .5 of the last move.

Daily Level

Daily Level

Old resistance is flipped into support, which was a

prior major daily level. A long could be taken to
the next resistance level.

You can get early signs a range may form. If you have a move from a major support to a major
resistance, and the price starts to close back under the resistance line then it appears the resistance
is holding, and you could short back down to the bottom of the range support, which in turn will start
to create a channel.

CHANNELS
EARLY SIGN OF A RANGE COULD FORM
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Deviations from the range. Price gets outside of the
range, but instead of getting follow through, gets
series of Lower highs and Lower Lows to get back
inside of the range. Once back inside the range
after a deviation one would enter a trade to the
the side o the channel, taking profit in the middle.

Daily Level

Daily Level

Another deviation from the range, but quickly gets

back inside offering a long trade setup.

Nothing in trading is perfect but after all, range was formed after an early sign. There are some
deviations which is completely normal.

CHANNELS
PRICE FORMED A WELL DEFINED CHANNEL
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To start a parallel channel you need to connect 3 anchor points. Click on point 1 to 3 and drag
to point 2. This will create the channel. In an upwards trending channel like this you would use
the middle and top of the channel as price targets for a long.

CHANNELS
PARALLEL CHANNELS
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Price hits top of the channel and target was hit for the trade. As this is an
2 upwards sloping channel, one may not want to take a short from
the top, but rather enter a long from the retracement.

Price hits mid

point of the
channel and
retraces.

It played out. On the upwards sloping channel, one may rather take longs at the bottom of the
channel than shorts at the top.

CHANNELS
PARALLEL CHANNELS
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3. Price finding resistance off the mid

point of the upwards sloping channel.

2. Price starts to move upwards as

expected, and in turn creates a
new upwards channel within the
sideways channel.

1. When price hit the bottom of the

channel we would long to the top.

As price ranges from low to high in a (HTF) channel it is naturally expected there is an upwards
sloping channel being formed on the way up and a downwards sloping channel formed on the way
down.

CHANNELS
UPWARDS SLOPPING CHANNEL WITHIN A HIGHER TIMEFRAME SIDEAWAYS CHANNEL
davidd.tech
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= short. move outside was just a deviation from the
range (fake out).
Resistance
= short.

Close back inside the range = short - The

move outside was just a deviation from the
range (fake out).

Support
= long.
Support
= long.

Support
= long.

An example of not the most obvious yet respected channel and how one would/could trade it.

CHANNELS
PARALLEL CHANNEL EXAMPLE
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Short top of the range. As this is a

Price gets a candle close outside of the
smaller range I would trade side to side
range, and then back tests the channel
eg. Short top of the range, take profits
range resistance as support for
at the mid point of the range, but
another impulse wave upwards, a
ultimately hold the short till bottom of
perfectly traded channel.
the range.

Sideways r:ange is formed after

a rise in price, thus one could
favor trading longs in the range
(Though I would trade both
ways).

Long bottom of the range, taking profi t in

the middle of the range, but trading it back
to the top.

Previous smaller time frame channel

acts as support as price dips back
into it.

Never ever delete a channel from your chart when broken because the old channel will be broken
and come back as a new channel. The old channel acts as a support.

CHANNELS
PARALLEL CHANNEL EXAMPLE
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Price again finds support

Sideways channel on the mid point of the old
consolidation prior parallel channel.
to a big
move up.
Price has moved away from the
channel resistance, but when
price retraces it can find support
from the old channel.

Amazing example how old channel acts as support when revisited (multiple times).
That’s why we do not delete respected channels.

CHANNELS
PARALLEL CHANNELS
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highest candle close.

Partial rise is confirmed

when price closes back
below mid of the range.

As price closed above the

After the partial rise a short can be taken
mid point a long trade
with a close below the mid poind and
would be taken to the
aim for channel range low support.
high of the range.

Old resistance flips into support to
create the bottom of the channel.
When trading a big daily range
like pictured one would trade
from bottom of the channel to
Trade would be taken
the mid point.
again from the bottom of
the range support to mid
point.

An idea would be to draw channels from the respected bottom candle close to the respected
top candle close but if there is an important factor such as S/R flip, going for a wick is good as
well.

CHANNELS
PARALLEL CHANNELS
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0.236

0.382

0.5

0.618

0.66

0.786

Fibonacci channels are best used on higher time frame channels. The Fibonacci numbers
are then used as support and resistance lines. Always you must have confluence to enter a
trade. The standard Fibonacci channel is very similar to standard parallel channel, the only
difference is that Fibonacci channel is exclusively used on HTF. Start on the high and
connect series of the highs (second click) and the third click is on the low. Fibs have to be
respected and if they are respected you use it over classic channel.

CHANNELS
FIBONACCI CHANNELS
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We can see the 1 .75 .5 .25 and .0

points of the channel are well
respected as support/resistance.

When closing outside of the Channel

it is giving signs the downtrend is over
(or at least temporarily.

Long term channel are extremely useful for determining when a long term down or up trend is
over and the coin is ready to reverse. It has to be used on at least 1 day TF and it has to be
respected. If you look on 1+ year data and it is extremely volatile log scale is extremely helpful
because you can see all the movement. You can adjust the channel if break is not
convincing.

IOTUSD 11/2018 to 7/2019

CHANNELS
LONG TERM CHANNELS
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01 0.618 1.618 22 .618

— Best used on HTF. Connect the high (peak), to low

(valley), to secondary high (peak). On the second
peak, there should not be any other touch. Fibs are
areas of S/R and if 0, 0.618 and 1 have no respect it
is not a valid channel.
3

— Take a trendline from c the major peak to major

valley (point 1 to point 2) in a downtrend, and then
your 3rd click will be on a significant peak (point 3).

The width from the 1-2 trendline to point 3 is the Fib

channel, from this we can calculate price targets
for where a bounce can come to. Always use a Fib
channel with confluence with another indicator! To
know that you have a valid Fib channel you want to
see the 0. 618 or 1 trendlines have been respected in
the past, if they haven’t the Fib channel is not valid.

XBTUSD 9/2019

CHANNELS
FIB CHANNEL EXTENSION
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0 0.618 1 1.618 22 .618

Exact touch
which gave
10% bounce.

A really nice example of nicely respected Fib channel extension.

XBTUSD 1/2019 - 10/2019

CHANNELS
FIB CHANNEL EXTENSION
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