How to draw a channel? We are on Dollar - Japanese yen, it is a weekly chart and the first thing that we
can notice is that the price is going slowly down and we are currently in a downtrend.
What we will normally do in this situation is to draw a downtrend line to connect lower highs.
So I draw my line here connecting these two highs.
Now when you draw a trend line, sometimes you have a feeling that on the other side the you can draw
exactly the same line to connect some important points. In this case, we are in a downtrend,
I drew a trend line to connect lower highs, but I immediately have a feeling that I can draw the same
line to connect lower lows on the opposite side.
In this case, instead of having a trend line, that I'm deleting, you can click on this button here and it
will draw a channel.
Let's start by drawing the same trend line. I'm drawing exactly the same trend line that I had before.
Now we have another line here that is parallel to our trend line. With this line,
we can try to connect lower lows as well.
So we will have something like that.
You can try to place it on one of the lows, here for example, but it doesn't look very nice.
Let's try here...
it looks much better.
We can try with this other low and it looks perfect,
so I will keep it like that.
There is no general rule to build a channel.
You just need to develop an eye for it, with practice.
Also, sometimes you can draw a very good trend line but you can't build a good channel because the situation
on the opposite side is different
and a parallel line would not make any sense.