Trends/Trendlines and channels

Horizontal channel

Price bouncing between a flat floor and a flat ceiling, going nowhere over the long run.

Trendlines and channelsBest on 3M, 6M, 1YAlso called sideways channel, trading range

Illustration of the horizontal channel shape. It is a sketch, not real price data.

What it shows

A horizontal channel has a flat upper line through highs that reach about the same price and a flat lower line through lows that reach about the same price. Price moves between them without a clear direction.

The gap between the lines is the range. Many traders watch for price to leave the range, because that ends the sideways phase.

How we find it

The same code that draws it on your chart follows these steps, with the same result every time.

Find clusters of swing highs within the tolerance of each other and set the upper line at their average.
Find clusters of swing lows within the tolerance and set the lower line at their average.
Require at least 2 touches on each line and a flat slope (under 3% over the whole range).
Keep it only if no close ended outside the lines by more than the margin.

Starting values: Tolerance 1.5% of price; Minimum touches 2 each side; Flatness under 3% drift; Minimum length 20 bars. These are proposed and will be tuned on real price data before launch.

How to read it

The upper line is where rallies stopped. The lower line is where dips stopped.
The shaded area is the range price is trading in.
The width as a percent of price tells you how wide the swings are.

Status labels you may see

Label	What it means
Inside the range	The last close is between the lines.
Near the top	Within 2% of the upper line.
Near the bottom	Within 2% of the lower line.
Closed outside	Past either line.

What cancels it

A close beyond either line. After that it is a breakout from the range, not a range.

What traders check next

Whether the range is narrowing or widening over time.
Volume on touches and on any move out.
How long the range has lasted.

Limits

Tolerances change which highs and lows count as the same level.
Short ranges can be noise.
A range may end with a move in either direction.

Try it in forecastviz

Open any ticker and choose Trendlines and channels → Horizontal channel in the left menu.
Switch between 3M, 6M, 1Y to see how the picture changes.
Compare with Rectangle and Ascending channel on the same chart.

Open on a ticker

Questions

Is this the same as a rectangle?

It is the same shape. We call it a channel here when it is just a range, and a rectangle when we treat it as a pattern with a measured move.

How long does a range last?

It varies from weeks to years. We do not claim a typical length.