Equidistant Channel

Equidistant Channel represents two parallel trend lines, which serve as support and resistance lines for the price. Equidistant Channel  represents an inclined trading range with the lines connecting highest and lowest prices.

Building

Moving along the chart, the price forms highest and lowest points that can form trend channel. To build equidistant channel, you need:

- Determine direction of Forex trend

- Indicate width of channel

Prevailing tendency is defined by a trader. If trend is upward, the line should be built along two lowest points (bottom – bottom). In case of downward trend, the line is built along two highest points (top - top)

Parallel line is built as distant as possible from the trend line. The result will be equidistant channel within the borders of which fluctuation of currency rate takes place.

To build such a channel in MetaTrader 4 trading terminal, choose “Insert – Channels - Equidistant”.

Pic. 1

Initial posint shall be put to the extreme point (top or bottom), the second point – to the extreme point following to the first correction or just on the most distant value of the price. Then we will indicate width of channel as per above-mentioned guidance and form trading range lines of which will serve as potential entrance points. Upper line is the resistance and bottom line is the supportive.

Pic. 2 – Ascending Equidistant channel

Under ascending tendency, overrun of the price beyond channel is considered to be temporary, soon the price expected to return to the channel. Break up of upward channel down means the trend has stopped and reversal is possible.

Under descending tendency, everything is opposite: overrun of the price beyond channel downward is considered to be temporary, soon the price expected to return to the channel. Break up of downward channel up means the trend has stopped and reversal is possible.

It is not recommended to work against major movement. The best choice is to look for alerts for purchase near the bottom border in upward channel and selling signals should be looked near upper border in downward channel

Conclusion

The idea of equidistant channel is the implication of zigzagging price line within the range of borders (parallel lines). By having determined trend at the earliest stages, this channel can greatly improve entrance points.