Trendlines & Channels

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There are 2 most well-known methods for plotting trendlines and channels:

The Wyckoff method

"The Wyckoff method, developed by Richard D. Wyckoff in the early 1930s, has aided traders in their pursuit for successful trading since its inception.

Uptrends can be charted using a demand line and an overbought line. A demand line shows an advancing angle in a bull market by passing through two successive points of support (the lowest points of two successive reactions). An overbought line is drawn parallel to the support line and passes through the first point of resistance (top of rally) that occurs between the support line's successive points of support .

Downtrends are defined with a supply line and an oversold line. A supply line shows the angle of decline in a bear market by passing through two successive points of resistance (tops of rallies). An oversold line is drawn parallel to the supply line and passes through the first point of support (lowest point of a reaction) that occurs between the supply line's two successive tops.

If the market is in a neutral position, the trading range is determined with a support level and a resistance level ...

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The Bollinger method

"John Bollinger once said that the conventional method of drawing trendlines under the lows during uptrends and above the highs during downtrends was backwards. Instead, Bollinger provocatively suggested, trendlines should be drawn above the highs during uptrends to better understand the upside potential in the trend. Conversely, Bollinger added that trendlines under the lows during downtrends would provide traders and market analysts with a superior sense of the intensity of the downward price action.

While this might seem like mere clever counterintuitiveness from a master technician, those who use trend channels have long seen the wisdom in Bollinger's remarks. A trend channel, useful during trending markets, consists of a pair of parallel lines that encompass the highs and lows of a given trend and, as Bollinger's comments suggest, can provide great insights into the intensity -- and possible over-extension -- of a trend...

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A few examples of building trend channels using the UniZigZagChannel indicator:

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