DEFINITION of 'Channel'

A channel in finance and economics can either mean:

1. The system of intermediaries between the producers, suppliers, consumers, etc., for the movement of a good or service.

2. The technical range between support and resistance levels that a stock price has traded in for a specific period of time.

Channel

BREAKING DOWN 'Channel'

Distribution Channels

The most basic kinds of channels for products or services are distribution channels, which describe the method by which a product moves from producer to consumer. These channels vary considerably in complexity depending on the product. In the simplest channel, the producers sell their own products directly to a consumer (like a farmer selling their own wares at a farmer's market). Other channels are much more complex, with products sometimes passing from producers to brokers to wholesalers or retailers before finally reaching the consumer.  Each step of distribution channel increases the costs of distribution. Reducing the steps of a distribution channel is a common way for businesses to cut expenses.

Not all channels move directly towards consumers: business-to-business marketing channels involve transactions between two companies. Oftentimes, especially in technology industries, one company will manufacture an internal item (like a computer chip) and sell that product to other manufacturers, who will use the chip to assemble a more complex product which might be then be sold to consumers.

Stock Price Channels

A price channel for a stock can be drawn by drawing lines connecting the stock price's peaks and lows over a period of time. Price channeling can be a very effective tool for stock analysis. Price channels require at least four points of contact (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 has fluctuated between approximately consistent highs and lows, a trader can use channeling to predict price peaks and lows in real time, and trade with that information. Channeling, therefore, is best for moderately volatile stocks which experience regular peaks and troughs.  A breakout of a technical channel is seen as a bullish (on an upward breakout) or bearish signal (on a downward breakout). It is nearly impossible to predict a breakout of a stock from its channel, but if it does happening, channeling loses its relevance as a predictive indicator.

 

 

RELATED TERMS
  1. Distribution Channel

    The chain of businesses or intermediaries through which a good ...
  2. Range-Bound Trading

    A trading strategy that identifies stocks trading in channels. ...
  3. Price Channel

    The price action contained between two parallel lines in a trend. ...
  4. Ascending Channel

    An ascending channel is the price action contained between upward ...
  5. Descending Channel

    A descending channel or downtrend is the price action contained ...
  6. Trading Channel

    When charting the price of an asset, this is the space on the ...
Related Articles
  1. Trading

    Channeling: Charting A Path To Success

    Find out how to build these charts showing buy, sell, stop-loss and take-profit points, and even estimate length of trade.
  2. Small Business

    What's a Distribution Channel?

    A distribution channel is a chain of businesses through which a manufacturer sends his products to get them to a final buyer. It may involve wholesalers, distributors, agents and retailers. Companies ...
  3. Small Business

    What Is The Difference Between A Direct And An Indirect Distribution Channel?

    After a firm makes its products, it must find an efficient way to deliver them to a retail store or customer’s home. Distribution channels fill that role.
  4. Investing

    Time to Buy These Stocks at Support

    These stocks are moving within well-established trend channels and have recently pulled back toward channel support, presenting a potential buying opportunity.
  5. Small Business

    A Mixed Bag for Social Media Stocks (FB, LNKD)

    Potential stocks trades and outlook for Facebook, Twitter and LinkedIn.
  6. Investing

    Gold Bulls In Control After Brexit (GLD, PHYS)

    Gold funds lifted to the top of 4 month rising channels on Friday and should break out into healthy trend advances.
  7. Small Business

    3 Predictions for TV in the Next 10 Years

    Understand current technological trends in the TV industry and what has changed in the past. Learn about three predictions regarding the future of TV.
  8. Investing

    How Does Sling TV Work? (DISH)

    Looking for a way to cut the cable TV cord? Sling TV, which streams channels live, is a great deal if you can keep from adding a lot of the extra packages.
  9. Trading

    Stocks Close to Technical Entry Points

    These stocks are trading near trendline support, providing a potential buying opportunity.
  10. Trading

    Advanced Channeling Patterns: Wolfe Waves and Gartleys

    Discover how these provide the trader with insight into both the timing and scope of breakouts.
RELATED FAQS
  1. What are some ways to make a distribution channel more efficient?

    Understand what a distribution channel is and how companies use them to move product. Learn how to make a distribution channel ... Read Answer >>
  2. What are the advantages of having fewer distribution channels?

    Understand what a distribution channel is and how companies leverage them to sell products. Learn about the advantages of ... Read Answer >>
  3. What is the difference between a direct and an indirect distribution channel?

    Learn about the primary differences between direct and indirect distribution channels, and under what circumstances a company ... Read Answer >>
  4. How do I use a Turtle Channel to create a forex trading strategy?

    Learn two simple forex trading strategies, one trend trading strategy and one swing trading strategy, that can be implemented ... Read Answer >>
  5. Why is a Turtle Channel important for traders and analysts?

    Understand the significance of the turtle channel indicator and the primary purposes that it serves for traders and market ... Read Answer >>
  6. How are distribution channels generally organized?

    Find out how distribution channels are commonly organized, and learn about the most important elements in the distribution ... Read Answer >>
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center