Another vital tool that is extensively used in Technical Analysis of the Forex trade is Price Channels. These are basically used to get an idea of beneficial time to trade a certain currency. Timing plays a significant role in earning profit in Forex Trading. Obviously earning profit is the ultimate goal of every trader and investor. As these channels reflect the beneficial trends of trade so these are also known as Trend Channels. It is a step ahead of trend lines. Trend Lines have a great significance in Forex Trade. Thus Price channels also hold great importance in Forex Trade. Such tools of technical analysis enhance excitement in Forex trade. At the same time it motivates the traders to work hard in the competitive field of Forex trade and dealing with forex accounts. Let’s have a look at Trend channels.
Creating a Price Channel:
It is easy to draw a Price Channel. You just need to add a straight line on the angle of the downtrend or uptrend and a Price Channel is created. The channels are ready to help you out.
First of all draw an uptrend line. Then at its very angle, add a parallel line. Third step involves moving the line towards the recent highest point of trade. Here you go you have created an ascending trend channel.
Downward Price Channel:
At the very angle of downward trend line, you need to add a parallel straight line and then just move it towards recent lowest points. The downtrend price channel is created.
Support and Resistance:
The top or the bottom points of price channels are regarded as focal points for the traders. Just like trend lines, Price Channels also highlight the Support and Resistance points in Forex trade. The marks on the uptrend show the resistance points. Similarly the marks on the downtrend reflect the Support points.
Slopes on Price Channels:
The trend is considered to be bullish when there is a positive upward slope on trend channel. Similarly the trend is regarded as bearish if the Price Channels have a negative downward slope. Therefore it is the best time to buy a currency when the price reaches lower trend channel. Alternatively it is the most beneficial time to sell a currency if the price of that currency reaches the upper trend line.
Traders should also keep an close eye on Fundamental analysis aspect.