A channel in technical analysis is a price pattern where an asset’s price moves between two parallel trendlines, creating a defined trading range. The upper trendline acts as resistance (connecting swing highs), while the lower trendline provides support (connecting swing lows). Channels can trend upward (ascending channel), downward (descending channel), or sideways (horizontal channel).

Channels help traders identify potential entry and exit points, with prices typically bouncing between the channel boundaries. Traders often buy near the lower channel line and sell near the upper channel line, while a breakout above or below the channel may signal a new trend direction. Channel width and angle provide insights into volatility and trend strength.

Real-world example: EUR/USD trades in an ascending channel between 1.0800 (support) and 1.1200 (resistance) for three months, with traders buying near 1.0800 and selling near 1.1200 until a breakout occurs.