A channel is formed by at least four points of contact, as we need at least two lows to connect them and two highs to connect them. In general, there are three types:
1. An upward sloping channel is called a bullish channel.
2. A downward sloping channel is called a bearish channel.
3. A channel with a horizontal trendline is called a horizontal channel, trading range or rectangle. Bullish and bearish channels are also called trend channels, as the price tends to dominate in one direction. This can be referred to as a bullish or bearish movement, as the bullish channel can signal new future highs, while the bearish channel can indicate new future lows. Buying or selling short in the channel
Channels can sometimes offer buying and selling points, and there are a few rules for entering long or short positions:
When the price reaches the top of the channel, sell your existing long positions and/or short positions.
When the price is in the middle of the channel, if you are not trading, do nothing or hold your current trades.
When the price reaches the bottom of the channel, buy back your existing short positions and/or open long positions. There are two exceptions to these rules. First, if the price breaks through the top or bottom of the channel, the channel is no longer complete. Before a new channel is formed, do not enter any more trades. Second, if the price fluctuates between the channels for a long time, a new, narrower channel may form. In this case, enter or exit near the ends of the narrower channel.
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