How to Draw Trendlines & Channels on Trading Charts

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

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

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

The basis of this oil analysis is based upon the idea that markets move in trends. Oil trend lines are used to show 3 things.

• The general direction of the market - up or down.
• The strength of the 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 trendline is broken.

Drawing these trendlines on a chart portrays the general trend of the market which can either be upward or downward.

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

Tutorial:How to Draw Upwards Trendline and Trade Upward Trend Move

Tutorial: How to Draw Oil Trading Downwards Trendline & Trade Downwards Trend Move

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

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

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

Principles of How to Draw Trend Lines

1. Use candle charts

2. The points used to draw the trend line are along the lows of the crude trading price bars in a rising crude market. An upward 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 crude price bars in a falling downwards market. A downwards bearish trend move is defined by lower highs and lower lows.
4. The points used to draw trend lines are extremes points - the high or the low crude trading price. These extremes are important because a close beyond the extreme tells investors the trend of oil might 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 2 main ways of trading this trend line analysis set-up:

1. The Trend Line Bounce - Oil Trend Line Bounce
2. The Trend Line Break - Oil Trendline Break

Technical Analysis Methods of Trend Lines

The trend line bounce is a continuation signal where crude trading price bounces off this trend line to continue moving in the same direction. In a downward trend, the market will bounce downwards after hitting this trend line level which is the resistance level. In an upward trend, the market will bounce upward 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 up trend is broken then the sentiment of the market reverses & becomes bearish & when a down trend is broken then the market sentiment reverses and becomes bullish.

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

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

Entry, Exit & Setting stops:

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

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

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