Price channels map a commodity’s trading range to highlight breakouts, helping traders spot potential trend reversals and momentum shifts early.
In this guide to understanding the Price Channels Indicator, we’ll show you what this chart looks like, explain its components, and teach you how to interpret it.
What Is a Price Channels Indicator?
Price Channels suggest possible buy and sell signals based on price breakouts.
- Upper Price Channel: The highest high over a user-defined time period.
- Lower Price Channel: The lowest low over a user-defined time period.
The user-defined time period is generally 20 periods.
What Does the Price Channels Indicator Look Like?
To illustrate how a price channel is, let’s look at a chart of the Nasdaq 100 ETF (QQQQ) as shown in Chart 1:
How to Interpret Price Channels
Price Channels are primarily used to identify price breakouts.
The possible buy and sell signals are shown below Chart 2 of the QQQQ’s:
Price Channel Potential Buy Signal
A trader might buy when the price closes above upper bands.
This is similar to a trader buying a breakout above resistance, where the resistance is equal to the highest high of the past 20 trading days.
Price Channel Potential Sell Signal
A trader might sell when price closes below lower bands.
This is like selling a breakout below support, but the support is equal to the lowest low of the previous 20 trading days.
Regulated Brokers: Where Can I Trade Commodities?
FAQ
Below we answer some common questions about Linear Regression Line indicators.
What is a channel?
A channel is created by two parallel trendlines that mark the upper and lower bounds of an asset’s price over time. The upper line tracks the highest highs and the lower line tracks the lowest lows, as shown in Chart 1 above. The angle of the channel can add significance to the price movement, whether upward, downward, or parallel to the time series across the bottom of the price chart.
Further Reading on Trend Indicators
These trend tools complement Price Channels: Andrew’s Pitchfork, Gann Fans, and Triangular Moving Average.
Technical analysis is most widely used in CFD and forex trading. If you’re ready to apply these techniques, browse our vetted CFD brokers or forex brokers.
Update history
This page was revised 5 times between August 2020 and April 2026.
Added broker recommendation links and callout promoting CFD and forex trading resources in Further Reading section.
Removed outdated broker table and list from regulated brokers section, restructured Further Reading with focus on trend indicator tools.
Added new section defining price channels with explanation of trendlines and their significance.
Added introductory overview, table of contents, and restructured content with new headings; reorganized broker section, refined explanations for clarity, and consolidated Further Reading with related links.
Added new section headings for "Price Channel Potential Buy Signal" and "Price Channel Potential Sell Signal" with accompanying explanatory content, and restructured content to include "How to Start Trading" section with broker resources.
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