How to Draw TrendLines and Channels on xauusd Charts

Sometimes support and resistances are formed diagonally in the same way like a stair-case. This forms a trend which is a sustained movement in one direction either upwards or downwards.

A trend line depicts the points of support and resistance for the price, based on the direction of market. For an upward moving market trend - trend line will shows the points of support & for a downwards moving market trend - trend line will show the areas of resistance - trendlines are mainly used by many traders to identify these resistance and support levels on charts.

A Trend line is a slanting straight line that connects 2 or more price points and extends into the future to act as a zone of support/resistance for the price movement. There are two different types of trend-lines: upward trend line and downward trend-line. Trend line is an aspect of analysis that uses line studies to try & predict where the next price move will head to. A trader must know how to draw and interpret signals derived & generated by this trend-line tool.

The basis of this analysis is based upon the idea that the markets move in trends. Trend lines are used to display 3 things.

• The overall direction of market - up or down.
• The power of current trend - and
• Where future support and resistance will be likely located

If trend-lines forms in a certain direction then the market usually moves in that direction for a period of time until a time when this trend line is broken.

Drawing these trend lines on a chart displays the overall trend of the price which can either be up-wards or downwards.

Below is example of how to draw these trend lines on charts

Course: How to Draw Up-wards Trend Line & Trade Upwards Trend Move

Course: How to Draw Downward Trendline & Trade Downward Trend Move

The MetaTrader 4 software provides charting and trading tools for drawing these trend lines on charts. To draw trend lines onto a chart, traders can use the tools provided in MT4 software that is displayed below.

To draw trend-lines on a chart just click the MT4 Draw Trend-Line Tools just as is shown above on the MetaTrader 4 software trading analysis software & select point A where you want to start drawing the trend line & then point B where you want the trend line to touch. You also can right-click in the trend line and on the properties option select the choice/option to extend its ray by ticking "ray check box", if you do not want to extend the trend line, then untick/uncheck this option on your MetaTrader 4 software. You also can change other trend line properties such as color and width on this property pop-up window panel of the trend line properties. You can download MT4 software & learn trendline trading analysis with it.

The trend is your best friend. Is a popular saying among traders because you never should go against it. This is the most reliable strategy to trade because once the prices start to head in one particular direction they can move in that particular direction for sometime - therefore using this market trend strategy presents an opportunity to make trading profits from the market.

Guidelines of How Do I Draw TrendLines

1. Use candle charts

2. The areas used to draw the trend line are along the lows of the price bars in a upwards market. An upwards bullish trend move is defined by higher highs and higher lows.
3. The points used to draw the trend line are along the highs of the price bars in a falling downward market. A downwards bearish trend move is defined by lower highs & lower lows.
4. The points used to draw trend lines are extremes points - the high or the low price. These extremes are critical because a close beyond the extreme tells investors the trend may be changing. This is an entry or an exit signal.
5. The more often a trendline is hit but it's not broken, the more powerful its signal.

There are two main ways of trading this trend line trading analysis setup:

1. The Trendline Bounce - Trendline Bounce
2. The Trendline Break - Trendline Break

Technical Analysis Methods of TrendLines

The trend-line bounce is a continuation signal where the price bounces off this trend-line to continue heading in the same direction. In a downward trend, the market will bounce downward after hitting this trend line level which is the resistance level. In an upwards trend, the market will bounce up-wards after hitting this trend line level which is the support level.

The trend line break is a reversal signal where the market goes through the trend line & starts moving in the opposite direction. When a upwards trend is breached then sentiment of market reverses and becomes bearish & when a down trend is broken then the present market sentiment reverses and becomes bullish.

For very strong trends, after this trend-line break signal, the price will consolidate for a period of time before going in the opposite market direction. For short term trends then this trend-line break signal will mean price may reverse direction immediately.

In trading, both the trend line bounce & the trend line break that are used in analysis charts are based upon these trend line levels being support and resistance zones.

Entry, Exit & Setting stop losses:

This trend line method is used to identify good entry and exit points, protective stop losses are placed just above or below these trend lines. The trend line bounce is a low-risk entry technique used by traders to place and open entry trades after price has retraced. Trades are setup along these trend-line levels & a stoploss order placed just above or below these trend-lines.

The trend line break is a crucial and important technical indicator of possible price trend direction reversal. When the trend line is broken the price begins to head in the opposite direction. This provides an early exit signal for traders to get out of their open positions and take profits. When there's a penetration of these trend line levels, it is a signal that the price can start moving in the opposite trend market direction.

Unlike other analysis indicators there is no formula used to calculate the trend line, this trend-line setup formation is just drawn between two chart points on the trading chart.

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