Channel Definition

What Is a Channel ?

The terminus “ duct ” may refer to a distribution system for businesses or a trade range between documentation and resistance on a price chart .

Key Takeaways

  • The term “channel” may refer to a distribution system for businesses or a trading range between support and resistance on a price chart.
  • Distribution channels describe the method by which a product moves from producer to consumer.
  • A price channel is a chart pattern that graphically depicts the peaks and troughs of a security’s price over a period of time.

Understanding Channel

A channel in finance and economics can either mean a :

  • Distribution channel, which is a system of intermediaries between the producers, suppliers, consumers, etc., for the movement of a good or service.
  • Price channel, which is a trading range between support and resistance levels that a security’s price has oscillated within for a specific period of time.

Channel
prototype by Julie Bang © Investopedia 2019

distribution Channels

distribution channels describe the method by which a product moves from manufacturer to consumer. These channels vary well in complexity depending on the product. Producers selling their products directly to a consumer ( like a farmer selling their goods at a farmers grocery store ) is the most basic type of distribution channel .

other channels are a lot more complex, with products sometimes passing from producers to brokers to wholesalers or retailers, before last reaching the consumer. Each step of the distribution channel increases the monetary value of getting the product to the consumer. Reducing the steps of a distribution duct is a coarse way for businesses to reduce expenses .

not all channels move directly toward consumers. Some, such as a business-to-business marketing impart, involve transactions between two companies. For example, a engineering company may manufacture an inner item, such as a computer check, and sell that product to other manufacturers that use it to meet hardware components .

price Channels

A price channel is a chart convention that diagrammatically depicts the peaks and troughs of a security system ‘s price over a menstruation of prison term. If there is an discernible isotropy in the cycle, then it is considered to be a valid price channel that can be used as a instrument for stock analysis. grocery store technicians suggest that at least four points of contact are required ( two each for the upper and lower lines ). Price channels can move either upwards, downwards, or stay flat, but the two lines must be approximately parallel .

If a stock is fluctuating between coherent highs and lows, a trader can use a transmit to predict monetary value peaks and troughs. For case, a trader could buy a livestock when the price touches the lower groove line and set a profit target at the upper channel lineage .

Using channels is estimable suited for reasonably explosive stocks that experience even oscillations. Traders consider an upward break from a channel as bullish, and a downward break as bearish. irregular monetary value spikes above and below a price channel are common, therefore, other indicators should be used to confirm a break. Channels lose their relevance as a predictive indicator when prices break out from the radiation pattern .

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