A bullish price structure defined by two parallel upward-sloping trendlines. Price bounces between support (lower line) and resistance (upper line) as the trend moves higher.
What Is an Ascending Channel?
An ascending channel (also called a rising channel) is formed by drawing two parallel trendlines that slope upward. The lower trendline connects a series of higher lows and acts as Support. The upper trendline connects a series of higher highs and acts as Resistance. Price oscillates between these lines as the overall trend moves higher.
How to Trade Within the Channel
Traders use the channel in two ways. First, buy at the lower trendline (support) and sell at the upper trendline (resistance) as price bounces back and forth. On EUR/USD, a touch of the lower trendline with a bullish candle like a Hammer provides a long entry with a stop below the trendline.
Second, trade the eventual breakout. An ascending channel is bullish while intact, but a break below the lower trendline signals a potential trend reversal. Enter short on a confirmed break below with a target equal to the channel's width.
Drawing the Channel
To draw an ascending channel, start with the lower trendline connecting at least two higher lows. Then draw a parallel line from the highest point between them. At least two touches on each line validates the channel. More touches increase its significance.
Related Terms
Descending Channel
A bearish price structure defined by two parallel downward-sloping trendlines. Price bounces between resistance (upper line) and support (lower line) as the trend moves lower.
Uptrend
A market condition where the price consistently makes higher highs and higher lows, indicating that buyers are in control and the overall direction is upward.
Support
A price level where buying interest is strong enough to prevent further decline. The price tends to bounce upward when it reaches support.
Resistance
A price level where selling interest is strong enough to prevent further advance. The price tends to reverse downward when it reaches resistance.
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