Human behavior isn’t just reflected in charts patterns as trend formations, small swings, big swings. Human behavior can also be conveyed in peak valley formation. Fibonacci channel utilizes these formations present in the marketplace & result in verdicts on how to correctly forecast significant changes in trend-directions.
The secret to Fibonacci channel is identifying the right peaks & valleys to work with. Resistance & support lines are drawn weeks & months in the future, after suitable bottoms as well as tops in the market place have been identified. You must only consider major bottoms & tops for the base line of a Fibonacci Channel with 1 or more noticeable side-swings. The broadest swing inside a time-frame of base line can be utilized for the trigger line.
Fibonacci channel can be defined as a technique of predicting levels of support & resistance under a normal category of Fibonacci researches for tech. analysis.
The channels are alternatives to the more common Fibonacci retracements, wherein retracement lines run diagonally instead of horizontally. For generating Fibonacci channels for the chart, you need to first create a base channel. This can be done by drawing parallel lines across the price top & price bottom.
The incline of these channel can be determined by linking either 2 tops or 2 bottoms, depending upon overall trend level. For instance, if the trend is downward, then 2 bottoms can be connected. On the other hand, if the trend is upward, then the slope can be generated from 2 tops. After you抳e drawn the base channel, more parallel lines can be drawn below/above it & the distance among the lines is decided by Fibonacci numbers. In addition, the Fibonacci channels can also be used to decide the resistance as well as support levels for the marketplace in a general trend.
Fibonacci channels, when used are frequently drawn together with Fibonacci retracement charts.
Also, the point where horizontal lines & the diagonal lines cross each other are considered to quite powerful levels of resistance or support for the marketplace.