MT4 Tools for Drawing Trendlines and Channels

How to Draw Downward Trendlines on Charts

A downwards trend-line is drawn above the downward trend setup formed by consecutive lower highs, the downward trendline must connect at least two highs, with the most recent high being lower. For our downwards trend examples we shall use the MT4 trading analysis software platform charts to illustrate an example of downwards xauusd trend.

Since gold price moves downwards in a zigzag format traders normally draw a downward trendline which shows the general downwards direction of the prices. In market technical analysis, this general xauusd gold price direction is known as the TREND by traders. In xauusd gold analysis definition we can define this down trend-line is plotted on a chart showing the resistance zones (bearish direction).

How Do I Draw Downward Trendlines on Charts? - Trendline Trade Signal Technical Analysis

A downward trend occurs when price makes series of lower highs & lower lows. Every price high is lower than prior high - lower high, & each low is lower than prior low - lower low hence showing bearish xauusd price movement.

Down trendlines gain & gather more validity every time gold price tests/touches the downward trend line but does not penetrate the trend line. A downward trend remains the general direction until this series of lower highs and lower lows is broken.

In analysis, An up-side penetration of a down trend-line is a trading buy signal, and usually the first indication which the bearish direction of prices might soon reverse.

Drawing a Downward Trendline

When it comes to learning how to draw & learning trading analysis of charts, you as a trader need to know that when market is bearish it forms lower lows & lower highs forming a down-ward general market direction. These are the points that are used to draw the downward trend-line.

To draw this downwards trend setup we use resistances & to do it correctly 2 resistances are needed. When xauusd gold price tests/touches this trendline, then we sell and place stop loss just a couple of pips above the sloping resistances:

How Do I Draw Downward Trendlines on Charts? - How Do I Interpret MetaTrader 4 Downwards Trendline?

How Do I Trade Downward Trendline

When trading using this trendline trading method, this trendline setup will show the overall market direction of the price as downwards therefore traders will only open short sell trades. These are the points where if price retraces then these points will provide strong resistance. This is why many short sellers will wait until xauusd gold price retraces upward and hits these retracements levels to open sell trade positions. Trades opened at these technical levels have a high Risk to Reward Ratio with minimum drawdown.

For Example, in the above example, a xauusd trader would have opened short sell trading signals at the resistance1, resistance2, resistance3 & these sell xauusd gold trade positions would have earned a lot of profits with minimum amount of drawdown/retracement.

Downward XAUUSD Channel MT4 Channel Indicator

A downwards channel is drawn by drawing a line that's parallel to the downwards trend-line and then adjusting it to touch the bottom boundary of price movement. This then forms a downward channel & as long as stays and remains in between these two channels the overall market direction is intact the market direction will continue to be bearish.

How to Draw Downward Trendlines on Charts - Platform MT4 Tools for Drawing Trendlines and Channels in Charts

the Downward XAUUSD Channel

The downward channel is used by Gold traders to show the levels where it is best to tp orders. Traders will book some profit once the price tests/touches lower channel and wait for another retracement before opening a short sell trade again.

Downward XAUUSD Gold Channels MT4 Channels Indicator

The trading tools to draw these channels studies on the MetaTrader 4 charts can be found on the Lines Tool-bar within the MT4 platform, to access this MT4 toolbar if it's not activated on your MT4 Platform, Click in 'View' Next to 'File' on the top left corner of the MT4 Platform Software & click View, Then Click in Tool Bars, Then Tick the Lines Tool-bar by clicking on it.

Shown Below is the screen shot of these MT4 tools: just click on this MT4 channels drawing tool & choose the point to where you as a trader want to place and set this channels tool on the chart.

MetaTrader 4 Analysis Charts - Downward XAUUSD Channels

Platform MT4 Tools for Drawing Trendlines & Channels on Charts

MetaTrader 4 Tool-bar - MT4 Tools for Drawing Trendlines and XAUUSD Channels used to obtain these trend line drawing tools is shown above, to draw these trend line set-ups or channels, just select the above MT4 trend line drawing tools shown & displayed on the MetaTrader 4 platform & select the two points where you want to draw the downward trend-line.

This trendline strategy is one of the simplest and popular indicators used by the Gold traders to analyze the price trend direction.

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