The Art of Channel Trading

By NinjaTrader Team

Like the rhythm of high and low tides shaping the shoreline, markets often ebb and flow between key levels of support and resistance. Unlike the predictable timing of tides and the definitive high-water marks they leave behind, market movements are less orderly but often display a similar dynamic moving between high and low price levels. 

Price channels (channel trading) can capture this market behavior, highlighting the boundaries within which price tends to move over time, a powerful framework that helps traders identify trade setups and navigate the ever-changing waters of the futures markets.


Markets rarely move in a straight line up or down but instead tend to trade between a range of key price levels. These trading ranges can be identified using a variety of hand-drawn price channels within the charting tools in the NinjaTrader platform. Burak Kaplan of Trading Channels explains how he uses price channels in conjunction with other technical indications to better support trading opportunities.

Key topics covered:

  • How to draw price channels
  • How to conduct multi-time frame analysis
  • How to confirm price channels with other technical indicators

What Is Channel Trading?

At its core, channel trading is about identifying the boundaries of price movements and using them to your advantage. Think of it like watching a ball bounce between the floor and ceiling. 

  • The ceiling (resistance) shows where prices are likely to stall or reverse downward.
  • The floor (support) marks where prices may bounce back up. 

When you connect these high and low points on a price chart with two trendlines, you get a price channel—a potential road map to future market action. 

Why Do Channels Work?

Markets thrive on patterns and often react to recurring high and low price levels, creating a visual pattern that traders can anticipate. Channels capture this repetition, offering a visual representation of where the price is likely to reverse in the opposite direction, especially if other key levels merge at or near the same prices.

Types of Channels

  • Ascending: Picture a staircase where each step, a swing high, is higher than the last. An ascending channel signals bullish market sentiment, with prices consistently hitting new higher highs.
  • Descending: Imagine that same staircase where each step, a swing low, is lower than the last. A descending channel signals bearish market sentiment, with prices consistently hitting new lower lows.
  • Horizontal: Prices sometimes move sideways with no discernable direction, bouncing between random highs and lows. Horizontal channels generally reflect indecision and can often lead to breakout opportunities.

How to Trade Channels

  • Buy low, sell high: Prices tend to revert to the mean with channel trading: buy when prices hit the bottom of the channel (support), and sell when prices approach the top (resistance). Combined with other indicators like oscillators and key price levels like pivot points, these trade setups generally often offer a greater than 55% rate of success.
  • Breakout bonanza: When prices have been trading within a channel or consolidating for a substantial period of time, price breakouts can occur. When prices break out of the channel, up or down, it can often signal a new trend. Although breakouts generally occur less than 45% of the timecatching a new trend early can lead to significantly bigger gains than rangebound channel trading.
  • The art of confirmation: Traders should never rely on just one signal, level, or indicator. Instead, they but should put together a number of visual tools to identify key price channel setups. 

Customize Your Futures Trading With Channels

Channel trading is a systematic approach to visually identifying trade setups in two modes: support and resistance, or price breakout. Price channels can be an effective tool across any chart interval, from intraday to daily charts, allowing traders of all levels to customize their approach to futures trading.

If you haven’t explored channel trading yet, now’s the time. Grab your mouse, connect those highs and lows, and watch those trade setups pop off the screen. 

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