Trade Gold Trading

Learn Gold Trading

Drawing Upward Trend Lines and Channels

An upward trend line is a line drawn on the Gold trading chart when the general trend of the prices is moving upwards and therefore this line is drawn below these upwards trending prices by connecting at least two lows of the upward price trend. This line will show the general trend of the market to be upwards.

The example below explains this concept and explains how prices move when in an upward trend. When the market is moving upwards it keeps forming new support levels as it moves upwards and these support levels are the ones used to draw the upward trend line.

Because the market moves in a zigzag manner, traders will normally draw a trend which shows the general upwards trending direction.

Upward Trending Market

An upward trend occurs when the prices of Gold keep making consecutive higher highs and higher lows. Each high is higher than the previous high - higher high, and each low is higher than the previous low - higher low.

The Upward trend lines gain more validity each time the price of Gold touches the line but does not penetrate it. An uptrend remains in place until this series of higher highs and higher lows is broken.

A downside penetration of an upward trend line is a technical sell signal, and usually the first indication that an uptrend may soon end or start to consolidate.

Drawing an upward Trend Line

When the online Gold metal market moves up it forms higher highs and higher lows forming a bullish market movement. An upward trend line can then be plotted by connecting these higher lows.

To draw this setup we use support levels made by the prices. To draw an upward trend line correctly two support levels are needed. When price touches this upward trend line we buy and place a stop loss just a few pips below this trend line. The diagram below shows an example of an upward trend line.

Upward Trend Line - Gold Trading

The trend line setup will show the general direction of the Gold market as bullish therefore traders will only open buy trades as long as price movement is within this setup and within the support levels. These are the levels where if the market retraces then these points will provide strong supports for the price. This is why many buyers will wait until price retraces downwards and hits these retracements levels to open buy trades.

Trades opened at these levels have a very high Risk: Reward Ratio and are very profitable.

In the above setup the trader would have opened buy/long trades from the signals generated at the support1, support2, support3 and these trades would have made a lot of profits with minimum amount of draw-down/retracement. This is why many traders like to trade using this trend line trading setup.


Drawing Upward Channel

An upward channel is drawn by drawing a line that is parallel to the upward trend line and then this new line is adjusted to touch the top boundary of the price movement. This then forms a channel of the price and as long as the price stays between these two channels the bullish market movement of Gold prices will continue moving up.

Upward Channel - Gold Trading

Trading the Upward Gold Prices Channel

This upwards channel is used by Gold traders to show levels where it best to take profits. Gold metal traders will take some profit once the price touches the upper channel and wait for another retracement before opening another buy trade again.

MetaTrader 4 Tools for Drawing Upward Trend Line and Channels

The tools to draw these setups on the MT4 are located on the MetaTrader 4 drawing toolbar within the MetaTrader 4 platform, to access this toolbar if it is not activated on your platform, Click in "View" Next to "File" at the top left corner of the MT4 and click "View", Then Click on "Tool bars", Then Check and select the "Lines Toolbar" by clicking on it.

Below is the screenshot of the MT4 trend lines drawing toolbar. To draw a trend line on a Gold trading chart just click on this tool and select the point where you want to draw.

MetaTrader 4 Toolbar for Drawing Upward Trend Line and Channels


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