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Channel Chart Pattern in Forex Trading

Chart patterns are one of the bases of technical analysis in Forex trading. Today we will discuss one of the first patterns that you need to learn before proceeding with your career in currency exchange – the Channel chart pattern. In this article we will discuss Forex channels and the way you can take advantage of them in trading.

What is Channel Chart Pattern

We have a channel pattern when the price is increasing/decreasing with the same intensity based on tops and bottoms. In this relation, two parallel lines could be drawn through the tops and the bottoms of the price action, which creates the channel.

Forex channels are an upgraded version of Trend Lines. The difference is that channels also suggest for how long an impulse could continue.

For this reason, channel patterns give you the opportunity to trade the trend impulse, as well as the correction. The reason for this is that the channel indicator suggests the end of the impulse and the beginning of the correction creating a fresh entry point on the chart.

Types of Channel Patterns

There are two types of chart patterns in Forex based on the direction of the trend: bullish channel and bearish channel.

The bullish channel represents price increase where the tops and bottoms are increasing with the same intensity.

The bearish channel chart pattern illustrates a price decrease where the tops and bottoms are decreasing with the same intensity.

Forex Channel Pattern Example

Now that you are familiar with the structure of the channel pattern, we will meet you with a real one on the EUR/USD chart. Take a look at the image below:Forex Channel Pattern

The two parallel blue lines illustrate a bearish channel pattern. The upper channel level acts as a resistance where the lower level acts as a support. Each time the price bounces from the upper or the lower level represents a tradable trading opportunity.

Forex Channel Breakout

Yes, but that’s not all about Forex channels. There is another lucrative trading opportunity that appears during channeling price moves. This is the channel breakout in Forex.

Every trading channel comes to its end at some point. This usually appears by a visual breakout on the chart as shown on the image above. Since the channel is broken, we have an indication that the price is eventually willing to change its direction.

So, a bearish channel broken through the upper level is an indication for an upcoming bullish move.

Opposite to this, a bullish channel that is broken through the lower level hints that the price might eventually start a decrease.

In both cases, this is an opportunity to enter the market against the previous trend and to try to hop in the beginning of a potential reversal.

Top Forex Trends in 2017 that Investors Should Approach

The world of Forex trade is always in the throes of change, and 2017 promises to be more exciting and fast-paced than ever. Even as the financial marketers are recovering from the impact of Brexit and the meltdown of the Oil prices, the world is waiting with bated breath on how President Trump’s policies, China’s strategic moves, and other macro-level factors will affect the Forex markets in 2017. This has caused questions around the top Forex trends in 2017 and where to find them. Therefore, we will now approach the strong Dollar, the Euro trend, the Yuan, the emerging markets currencies, as well as the Pound as alternatives to invest in Forex trends.

Strong Dollar Remains among the Top Forex Trends in 2017

Of late, the US Dollar has been seen strengthening against most currencies of the world, most notably Yen, Euro, and Pound.

Strong Dollar Trends in 2017

The bullish trendline Forex indicator  of the strong Dollar is likely to continue for the rest of the year, and buying the US dollar is top of the recommendations made by most analysts and experts. Experts predicted President Trump to smash the global economy, and this prediction still holds in the absence of any visible trends signifying otherwise. The elephant in the room, however, is what the Fed proposes to do with interest rates, with interest rates being linked to inflation in a big way. For this reason, we believe that the strong Dollar is among the top Forex trends in 2017.

The Euro Trend Faces a Strenuous Test

At the other side of the pond, even as the impact of Brexit plays out, the portents of “Frexit” and other challengers raise their head. 2017 is likely to be a watershed year, which will make or break the Euro trend.

The Euro trend has withstood several grave challenges in the immediate past, including the sovereign debt crisis of many Eurozone countries, and the substantial bailout programme for countries such as Greece, Spain, Ireland, Cyprus, and Portugal.

Euro Trend in 2017

The countries benefiting from such bailouts are still in the midst of deep structural reforms, and unprecedented fiscal consolidation. While such moves would stabilize the Euro trend, the currency is still fragile, as some of the underlying challenges remain unresolved. For instance, non-performing loans are a big worry for many European banks, with speculation rife many top banks could still go down. Such an economic catastrophe, combined with possible political turmoil in election-bound states such as France, Netherlands, Germany, and Italy could pose a big challenge for the currency, pushing the Euro trend to a downward spiral. The rise of populist forces and cries for nationalism could prompt new governments to follow trends that force national retrenchment, pulling Euro into a crisis. In short, the Euro remains exposed to big time financial speculation, putting it among the top Forex trends in 2017.

Emerging Market Currencies Likely to Weaken

Emerging market currencies are likely to weaken in 2017, as external liabilities of such countries piles up, and yields on investment remain low.

Currencies such as Malaysian Ringgit (MYR), the South African Rand (ZAR), and also the Australian and New Zealand dollars are likely to remain bearish for the best part of 2017.

The Yuan Remains Unpredictable

China devalued the Yuan in a big way, in 2016, plunging the world financial markets into a deflationary shock. Whether it would follow it up with similar devaluation in 2017 is unknown, but the fact remains that nation-states such as China have the capacity to stir up Forex today and financial markets in general. After all and such states are more willing than ever to exercise these options.

The Pound May Recover

The British pound was hammered in 2016, with thanks to Brexit. However, with no fresh negative news on the horizon, the Pound is likely to recover and reclaim some of its lost currency value.

Pound may Recover

Considering the above top Forex trends, 2017 looks to be an uncertain year for the Forex market and because of this it could be risky for newbie traders. However, it will hopefully prove lucrative for investors with more experience and who approach it systematically, making educated moves rather than hasty bets.

With macro-level trends notwithstanding, the Forex market can lean toward being fickle, dispelling old Forex trends at short notice when new emerge. Several financial institutions, such as CMC Markets and others, track the shifting trends on a regular basis and offer ready to consume products for investors. Taking this into account investors seeking to profit from the Forex market would do well to keep themselves abreast of the general macro-level trends, remaining flexible to invest according to one’s own personal appetite for risk and investment, as we navigate through what lies ahead for the top Forex trends in 2017.

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Trendline Forex Indicator: How to Draw Trendline in Forex

The trendline Forex indicator is an integral tool of the price action in Forex. This material will teach you how to properly apply and trade the Forex trendline.

Trendline Forex Indicator Explained

The Forex trendline is a single line, which outlines one directional price move from one point to another. When the price is following a trendline, this means it is changing its price following a general direction.

Understanding the concept of trends is integral in your ability to make money from the Forex portfolio management. Forex traders attempt to catch trend in order to buy when price is low and to sell when it is high, or the opposite. For this reason, the trendline Forex indicator is one of the crucial tools for boosting your Forex success rate.

Below you will see an example of a trendline Forex instrument:

trendline forex indicator explained

This is a 5-munte chart of the EUR/USD. The blue line indicates a Forex trendline indicator, which measures a price increase. The black arrows point the moments when the price tests the trend as a support (from below). Every time the price meets the trendline indicator we see an increase in the Forex rate.

We see 11 increases after interaction with the trendline. If you buy the EUR/USD Forex pair in every one of these moments, you will be able to sell on a higher price later. This is how the trendline Forex traders manage to generate profit from currency trends.

How to Draw Trendline in Forex

How draw to trendline in Forex depends on the points you have on the trading chart. Simply take a ray from your Forex trading platform, click on the first edge you see on the chart and then stretch it through the others.

how to draw trendline in forex

Every two bottoms could be connected with a single line. However, if three bottoms could be connected with a single line, then you have a bullish trend (inclined upwards). So you need three bottoms lying on the same line in order to confirm and draw a trend line. The first two bottoms just hint that the trend might be occurring on the chart. If the price creates another bottom on the same line, then you confirm the presence of a real bullish trendline Forex indicator.

Types of Forex Trendline Indicator

There are two types of trendline Forex indicator depending on the direction of the price.

Bullish Trendline Indicator

If the Forex tendency on the chart is bullish, you should use a bullish trendline indicator. You should take the first bottom on the chart, and then you should stretch the line through the other bottoms. The bullish trendline indicator should contain the zones around each of the bigger bottoms.

The two images above are example of bullish trends. If the Forex rate accounts for higher tops and higher bottoms you are looking at a bullish trend.

Bearish Trendline Indicator

If the Forex tendency on the chart is bearish, then you should use a bearish trendline indicator. Take the first top on the chart and stretch the trendline Forex indicator through the other tops. The bearish trendline Forex indicator should contain the zones around each of the bigger tops.

bearish trendline indicator

This is a real example of a bearish trendline indicator. The chart covered is 5-minute of the EUR/USD Forex pair. As you see, the EUR/USD Forex rate on the image above creates lower tops and lower bottoms.

How to Trade Forex Trendline Indicator

The key to making profits from Forex trendline indicator is to find a pre-existing trend and place a trade in the same direction. If the Forex rate has been moving lower for a significant amount of time the odds of it continuing to move lower in the near future are high. Opposite is applicable as well. If the Forex rate has been increasing recently, then the chances that the price will keep increasing are high.

Predicting when a trend is going to begin is one of the main challenges of Forex trading. The earlier you ride a trend the more money you are likely to make.

Due to this, people have devised complex methods to take advantage of trends. When trends are beginning, some use indicators and others use economics in order to support their trading decisions.

It is far easier to jump into a pre existing trend than it is to try and figure out when a new trend may begin. Trying to find the beginning of a trend may lose you a lot of money.

By jumping into a trend after it has already begun your sacrificing a little bit of potential profit for a higher probability trade. Opposite to this, by jumping into potential trend, you increase the potential profit of the trade for a lower probability trade.

Forex Trendline Trading Example

Now that you know how to draw trendline in Forex and how to trade Forex trendline, we will switch to a real Forex trend example.

forex trendline trading example

This is the 5-minute chart of the EUR/USD for Sep 8-9, 2016. The three points on the chart should be used to build the bullish trendline indicator. You should stretch the trendline through the three bottoms. Then you should buy the EUR/USD in the moment when the price bounces from the trend line.

Always use a Stop Loss order when you trade Forex trendlines. You should put it below the bottom created in the moment of the third bounce as shown on the image. Then if the Forex rate goes against you, the trade will be protected. Conversely, if you trade a bullish trend, the stop should be above the top you use to open your short trade.

The price increases afterwards. There are four bullish impulses created after the creation of the third top. Every one of these three impulses brings profit to your long trade.

In the red circle you see the moment when the EUR/USD Forex rate breaks the bullish trendline. This is a signal that the bulls are exhausted and the trend is probably finished. Therefore, you should close your long trade in the moment of the trendline breakout. The price difference between the third bounce and the breakout is your profit.


  1. The Forex trendline is an indicator which outlines the price direction of a Forex pair.
  2. Understanding the concept of the Forex trendlines will definitely improve your Forex trading routine.
    • If you enter early into a trend you have the potential to make more money, but this is riskier.
    • If you ride an already existing trend it is safer, but you will make less money.
  3. There are two types of Forex trendlines depending on the currency rate direction.
    • Bullish Forex trendline – takes into consideration the bottoms of the Forex pair
    • Bearish Forex trendline – takes into consideration the tops of the Forex pair
  4. You should use a ray to draw a valid Forex trendline indicator:
    • Bullish Forex trendline – Take the fist bottom and stretch a ray through the other bottoms. The trendline will be inclined upwards.
    • Bearish Forex trendline – Take the first top and stretch a ray through the other tops. The trendline should be inclined downwards.
  5.  You should remember two things trade profitably the Forex trendline:
    • Buy low, sell high.
    • Sell high, buy low.

Author: Christopher Webb

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