How to Draw Trend-Lines & Channels on XAUUSD Trading Charts

Sometimes support & resistance levels are formed diagonally in the same way like a stair-case. This forms a price trend which is a sustained movement in one direction either upward or downwards.

This trend can be depicted by a trend-line.

A trend line depicts points of support & resistance for the price, depending on the direction of the prices. For an upwards moving market a trend line will show the points of support and for a downward market the trend-line will show areas of resistance. Trend lines are mainly used by investors to identify these points of support & resistance.

A Trendline is a straight line which connects 2 or more price points & then extends in to the future to act as a level of support/resistance. There are 2 types of trend-lines: upward trend-line and downward trend line. Trend line is an aspect of technical analysis that uses line studies to try and predict where the next market move is likely to move to.

A trader wanting to trade Gold metal online using trading analysis must know how to draw & interpret the trading signals derived/generated by this trend-line trading tool.

Trend line analysis is based upon the idea that the market prices of Gold move in trends. The trend-lines show 3 things about current trend, these are:

The general direction of the market price - whether up or down
The strength of the current move
Where future support & resistance levels will likely be located

If a trend line forms in a certain direction, then the market mostly moves in that particular direction for quite some time until the moment when this trend is broken. When the trend is broken the trend-line will also be broken - meaning price will move below an upwards trend-line or above a downward trend-line.

Plotting trend-lines on Gold charts shows the general and overall trend of the XAUUSD prices - which can either be upward or downward.

The exemplification presented below show how to draw trend-lines:

Upward Trendline

How to Draw Upward Trend-Lines on XAUUSD Charts & Channels on XAUUSD Trading Charts - Upward Trend Line on Gold Chart

Upward Trend-Line - Upwards Trend of Gold Prices

Downward Trendline

How to Draw Gold Trading Trend Lines and Gold Trading Channels on XAUUSD Charts - Trend Lines on Gold Trading Chart

Downward Trend-Line - Downwards Trend of Gold Prices

Drawing Trend Lines on XAUUSD Trading Charts Using MetaTrader 4 Software Platform

The MetaTrader 4 XAUUSD trading platform provide trading charting & trading tools for drawing these trend lines on the XAUUSD charts. Gold traders can use drawing tools provided on the MetaTrader 4 software as is illustrated below to draw these trend-lines.

How to Draw Gold Trend-Lines and Gold Trading Channels on XAUUSD Charts - Drawing Trend Lines on Gold Charts

MT4 Platform Trend Line Drawing Tool

To plot trend-lines on a XAUUSD chart just click the line drawing tool shown above on the MT4 trading analysis software & choose point A where you want to begin drawing the line & then point B where you want the it to touch. You can also rightclick on the trend-line and after rightclicking on it, on "properties" option choose the option/choice to extend its ray by ticking the "ray check box", if you do not want to extend it, then uncheck/untick this option on your MetaTrader 4 platform software. You also can change other properties such as colour and width of the trend-line on this property settings pop-up window.

"The trend is your friend". Is a popular saying among investors because you should never go against the trend. The trend is the most reliable method to trade XAUUSD Gold prices because once prices start to move in one direction they can continue heading in that particular direction for quite a while - therefore using this method presents and gives you with the best chance to make profits from the online XAUUSD Gold metal trading market.

Principles of How to Draw Trend-Lines

Use candle charts to draw trend-lines
The points used to draw the trend lines are along the lows of the price bars in an upwards trend market. An upward bullish moving trend is defined by higher highs & higher lows.
The points used to draw are along the highs of the price bars in a downward trend market. A downwards bullish move is defined by lower highs & lower lows.
The points used to plot trend-lines are extremes points - the high or low price. These extreme points are important because a close beyond the extreme tells investors & traders that the market trend of the Gold metal prices might be changing. This is interpreted as an entry or an exit trading signal.
The more times a trend line is hit but not broken, the more powerful its trading signal is.

There are 2 main methods of trading this set-up:

The Bounce
Break

Technical Analysis of These Two MethodsThe trend-line bounce is a continuation signal where price bounces off this trend line and continue heading in the same direction as the trend-line.In an upwards trend move, the market will bounce upward after hitting and touching this technical level which is the support area.

In a downwards trend move, the market will bounce downward after hitting and touching this technical level which is the resistance level.

The trend-line break is a reversal where the market goes through the trend-line and starts going in the in the opposite trend trend trend trend trend trend trend direction.

When an uptrend is broken then the sentiment in the market reverses and becomes bearishWhen a downtrend is broken then the sentiment in the market reverses & becomes bullish

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

In Gold metal trading, both the trend-line bounce & the trend-line break that are used in technical analysis charts are based upon these levels being support & resistance areas.

Using Trendlines as Entry Signals, Exit Signals & for Setting Stops:

This trend-line trading method is used to identify good entry & points to exit opening & closing Gold trades, protective stop loss orders are placed just below or above these trend lines. The trend-line bounce is a low-risk entry method used by investors and traders to place entry trade transactions after price has retraced but the price is still within the trend direction. Trades are setup along these trend-line levels & a stop loss placed just above/below the trend-line.

The trend line break is a important technical indicator of possible trend reversal. When a trend line is broken the price begins heading in the in the opposite trend trend trend trend trend trend trend direction. This provides an early exit signal for investors and traders to get out of their open trades & take profits. When there is a penetration of these trend-line levels, it's a trading signal that the price might reverse start moving in the in the opposite trend trend trend trend trend trend trend direction.

Unlike other trading analysis indicators there is no formula used to calculate trend lines, this trend-line setup is just drawn between two chart points & a gold trader has to learn how to draw these trend-lines on their XAUUSD Gold metal charts.

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