Thursday, February 16, 2017 12:16:58 AM
Price Channels Calculation
Upper Channel Line: 20-day high
Lower Channel Line: 20-day low
Centerline: (20-day high + 20-day low)/2
The formula above is based on a daily chart and a 20-period Price Channel. Price Channels can be used on intraday, daily, weekly or monthly charts. The look-back period (20) can be shorter or longer. Shorter look-back periods, such as 10 days, produce tighter channel lines. Longer look-back periods produce wider channels.
The Price Channel formula does not include the most recent period. Price Channels are based on prices prior to the current period. A 20-day Price Channel for October 21 would be based on the 20-day high and 20-day low ending the day before, October 20. A channel break would not be possible if the most recent period was used. On the chart below, notice how prices broke above the upper price channel because the high was based on the next-to-the-last bar, not the current bar.
Upper Channel Line: 20-day high
Lower Channel Line: 20-day low
Centerline: (20-day high + 20-day low)/2
The formula above is based on a daily chart and a 20-period Price Channel. Price Channels can be used on intraday, daily, weekly or monthly charts. The look-back period (20) can be shorter or longer. Shorter look-back periods, such as 10 days, produce tighter channel lines. Longer look-back periods produce wider channels.
The Price Channel formula does not include the most recent period. Price Channels are based on prices prior to the current period. A 20-day Price Channel for October 21 would be based on the 20-day high and 20-day low ending the day before, October 20. A channel break would not be possible if the most recent period was used. On the chart below, notice how prices broke above the upper price channel because the high was based on the next-to-the-last bar, not the current bar.
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