Registered: Jan 2011
06-14-11 10:06 PM
In the third post we now see that the channel has been expanded.
Lets examine the basic rules for expanding channels and add them on to the list as point B
RULE for channels
To create a down trend channel
1. 1st draw top line connecting highs
2. Then draw a bottom parallel line. For the bottom line use the *SWING LOW mid point of the top line.
3 In a down trend, we first make the bottom line and then copy (make a parallel line) to the top
4. a channel by definition is 2 parallel lines that income most of the trend.
5. Trends need to be adjusted from time to time under a set of rules
B. Expanding channels
1. Channels can be changed and expanded.
2. A channel can be expanded if a higher high is made.
3. We will put our trend line now at the next highest swing low That is, the higher low above the previous one.
There is some confusion between next "highest swing low" and "higher low". Are these 2 concepts the same?
What if the next highest swing low is not as low as in the picture?
In this case, is it OK to cut off the bottoms of the other previous lows? Or should we try to include all lows in to the channel at this point ? Also, can we change the slope or steepness at this point?
Can the top of the channel also be adjusted if need be.
I will now go see if I can find the answers to these questions to clear things up. from there we will see if there is any interest by users in this thread. If so, we will continue. I know its very basic stuff. But we have to start some where. By looking at more advanced concepts and finding the basic reasoning behind them, we have a bit more interest in learning. Also we develop a sense for the more advanced ideas as explained in the other thread. Hopefully, as time goes on, we will have covered much of the basics.