Similarly, on a downtrend the original line is drawn touching successive tops so the parallel line is made to touch the corresponding bottoms.
The second line is called the 'return line' because it marks a point at which a price is about to return towards the trend line. The area between the original trend line and the new return line is known as the 'trend channel'.
On the previous page we noted the basic profit-making opportunities that may come when you identify a trend. Consider buying on an uptrend and consider selling on a downtrend, always watching for the moment when the trend is reversed. The main point of return lines and trend channels is to take advantage of the price oscillations along the way.
In the chart below we have split the trend channel into an upper 'sell' zone and a lower 'buy' zone.
Note that there needs to be enough price volatility to create quite a wide channel, otherwise the costs of dealing will extinguish your trading profits.
The return line can also provide a warning signal that a trend is about to be broken. If a price has generally stayed between the basic trend and the return line, but then fails to rise as high or fall down to the return line, it indicates that penetration may occur next time the prices approach the original trend line.
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