What is a Channel?

Channel Definition – A Channel is a straight line drawn parallel to the basic trendline. In an uptrend, the channel line slants up to the right and is drawn above rally peaks. Conversely, in a downtrend, the channel line is drawn below price bottoms and slants down to the right. Resistance is interpreted to be around rising channel lines and support around descending channel lines. A break above or below the channel signals a possible change of a trend. Forex traders know that one of the best currency trading strategies that can produce a high risk/reward ratio is the breakout strategy. The breakout occurs when the market suddenly bursts in a particular direction after a period of consolidation. The burst will usually give you an opportunity for a decent profit in either direction, and the loss will usually be much smaller compared to the profit it can produce.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.