How to Draw Trend Lines & Channels on XAUUSD Trading Charts

Sometimes support and resistance levels are formed diagonally in a similar way like a staircase. 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 and resistance for the price, depending on the direction of the market 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 determine these points of support & resistance.

A Trendline is a straight line which connects two or more price points & then extends in to the future to act as a level of support or resistance.There are two 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 price move is likely to head to.

A trader wanting to trade Gold metal online using trading analysis must know how to draw & interpret the trading signals 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 three things about current trend, these are:

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

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

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

The example 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 Platform

The MetaTrader 4 XAUUSD trading platform software provide trading charting tools for drawing these trend lines on the XAUUSD charts. Gold traders can use the drawing tools provided on the MetaTrader 4 software as 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 and 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 to extend its ray by ticking the "ray check box", if you do not want to extend it, then uncheck this option in your MT4 software platform. 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 best 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 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 you with the best chances to make profits from the online XAUUSD 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 and lower lows.
The points used to plot trend-lines are extremes points - the high or the 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 signal.
The more times a trend line is hit but not broken, the more powerful its trading signal is.

There are two main ways 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 this level which is the support area.

In a downwards trend move, the market will bounce downward after hitting this 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 opposite direction.

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

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

In XAUUSD 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 and resistance areas.

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

This trend-line trading method is used to determine good entry & exit points for opening and closing Gold trades, protective stops 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 trades after price has retraced but the market price is still within the trend direction. Trades are setup along these trend-line levels & a stop loss placed just above or below the trend-line.

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

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

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