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How to Draw Gold Trend Lines and Channels on XAUUSD Charts

Sometimes support and resistances are formed diagonally in a similar way like a staircase. This forms a gold trend which is a sustained movement in one direction either upwards or downwards.

A gold trend line depicts the points of support and resistance for the gold price, depending on the direction of the xauusd market. For an upward moving gold market trend - the gold trend line will shows the points of support and for a downward moving gold market trend - the gold trend line will show the areas of resistance - gold trend lines are mainly used by many xauusd traders to determine these resistance and support levels on gold charts.

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

The basis of this xauusd trading analysis is based upon the idea that gold markets move in trends. Gold trend lines are used to show three things.

  • The general direction of the xauusd market - up or down.
  • The strength of the current gold trend - and
  • Where future support and resistance will be likely located

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

Drawing these gold trend lines on a gold chart shows the general gold trend of the xauusd market which can either be upward or downward.

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

Tutorial: How to Draw Upward Gold Trend Line and Trade Upward Gold Trend Move

MetaTrader 4 Draw XAUUSD Trend Line Tools - How Do You Draw XAU TrendLines on XAU Charts?

Tutorial: How to Draw Downward Gold Trend Line and Trade Downward Gold Trend Move

MT4 Draw XAUUSD Trend Line Tools

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The MT4 software provides gold charting tools for drawing these gold trend lines on gold charts. To draw gold trend lines onto a xauusd chart, xauusd traders can use the gold trading tools provided on the MT4 software that is shown below.

XAUUSD MT4 Draw XAUUSD Trend Line Tools - How Do I Draw Gold Price Channels on Gold Charts?

To draw gold trend lines on a gold chart just click the XAUUSD MT4 Draw Gold Trend Line Tools as shown above on the MT4 platform technical analysis software and select point A where you want to start drawing the gold trend line and then point B where you want the gold trend line to touch. You can also right click on the gold trend line and on the properties option select the option to extend its ray by ticking the "ray check box", if you do not want to extend the gold trend line, then uncheck this option in your MT4 platform. You can also change other gold trend line properties such as color and width on this property popup window of the gold trend line properties. You can download MT4 software and learn gold trend line technical analysis with it.

The gold trend is your friend. Is a popular saying among investors because you should never go against it. This is the most reliable method to trade Gold because once gold prices start to move in one direction they can move in that particular direction for quite some time - therefore using this gold trend trading method presents opportunity to make profits from the xauusd market.

Principles of How to Draw XAUUSD Trend Lines

  1. Use gold candlestick charts

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

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

  1. The Gold Trend Line Bounce - Gold Trend Line Bounce
  2. The Gold Trend Line Break - Gold Trend Line Break

Technical Analysis Methods of Gold Trend Lines

The gold trend line bounce is a continuation gold signal where xauusd price bounces off this gold trend line to continue moving in the same direction. In a downward gold trend, the xauusd market will bounce downwards after hitting this gold trend line level which is the resistance level. In an upward gold trend, the xauusd market will bounce upwards after hitting this gold trend line level which is the support level.

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

For very strong gold trends, after this gold trend line break signal, the xauusd price will consolidate for some time before moving in the opposite direction. For short term gold trends then this gold trend line break gold signal will mean xauusd price may reverse immediately.

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

Entry, Exit and Setting stops:

This gold trend line trading method is used to determine good entry and exit points, protective stops are placed just above or below these gold trend lines. The gold trend line bounce is a low-risk entry method used by xauusd traders to place entry trades after xauusd price has retraced. Gold trades are setup along these gold trend line levels and a stop loss placed just above or below these gold trend lines.

The gold trend line break is a crucial indicator of possible gold trend reversal. When the gold trend line is broken the xauusd price starts move in the opposite direction. This provides an early exit signal for xauusd traders to exit their open trades and take profits. When there a penetration of these gold trend line levels, it is a signal that the xauusd price can start moving in the opposite direction.

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

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