By Daryl Guppy
Trading bands and trading channel are
related. Both chart patterns act as a restraint on price activity, confining
it within defined boundaries. The channel defines trend behaviour. The band
defines support and resistance behaviour and can be used to set price
The trading channel is constructed with
two trend sloping trend lines. These are parallel lines and as with any
trend line, their value changes daily. The lines show changing sentiment
about value. A trading channel shows the limits of this changing sentiment
as price bounces from support and retreats from resistance.
The trading band is defined by support
and resistance levels where the value remains constant. These are horizontal
parallel lines. Price stops trending and develops a sideways movement. These
patterns are more useful because they are used to project upside and
downside targets. When price moves above the resistance level then the width
of the trading and is used to set the potential upside target.
Both trading bands and trading channels
are range-bound chart features. They provide short term trading
opportunities as price moves between the support and resistance levels.
However the range bound trend continuation of a trading channel is traded
differently from the trading band with its potential for trade band breakout
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