Traders who use this strategy should ensure there is enough distance between the pattern’s parallel lines to set an adequate risk/reward ratio. For example, if a trader places a $5 stop, ...

A parallel line from the reaction highs was used to draw the channel line. As shown in the chart above, the price largely remained inside the channel from December 2019 to mid-December 2020.

Parallel trendlines connect the lower highs and lower lows of a security's ... The Bottom Line . A descending channel is a chart pattern that indicates a downward trend in the prices of a security.