Fibonacci Channel

Brief

Working with a Fibonacci channel.

Details

Fibonacci channel is a variant of a Fibonacci retracement pattern, with retracement lines running diagonally rather than horizontally. To create a Fibonacci channel for a chart, a trader first creates a base channel by drawing parallel lines through a price top and price bottom. The slope of the Fibonacci channel is determined by connecting either two bottoms or two tops, depending on the overall trend. Once the base channel is drawn, additional parallel lines are drawn above or below it, with the distance between lines determined by Fibonacci numbers.

The Fibonacci channel can be used to determine the support and resistance levels for the market within the overall trend.

When used, Fibonacci channels are often drawn along with a Fibonacci retracement. The points where the diagonal lines and horizontal lines cross are considered to be exceptionally strong levels of support or resistance for the market.