A price channel is formed by two parallel lines that enclose the price movements of an asset. The upper line represents resistance, while the lower line represents support. Price channels can slope upwards, downwards, or remain horizontal, corresponding to uptrends, downtrends, and sideways trends, respectively.

Importance of Price Channels

1. Trend Identification: Price channels help traders identify and confirm the direction of a trend.
2. Entry and Exit Points: Channels provide clear entry and exit points, making it easier to plan trades.
3. Risk Management: The boundaries of the channel help set stop-loss and take-profit levels, aiding in effective risk management.