Downwards Trendlines & Channels

How to Draw Downwards Trend Lines on Oil Charts

A downwards trendline is drawn above the downward trend pattern formed by consecutive lower highs, the downward trend-line must connect at least 2 highs, with the most recent high being lower. For our downward trend examples we shall use the MT4 technical analysis software charts to illustrate an example of downward trend.

Since price moves downwards in a zig zag manner traders normally draw a downwards trendline which shows the general downward direction of the prices. In market technical analysis, this general price direction is referred to as the TREND by crude traders. In technical analysis definition we can define this down trendline is drawn on Oil Trading chart showing the resistance levels (bearish market direction).

A down trend occurs when the price forms series of lower highs and lower lows. Each price high is going to be lower than the previous high - lower high, & each low is lower than the previous low - lower low therefore showing bearish price movement.

Oil Trading Down trend-lines gain more validity each time price touches the downward trend line but does not penetrate the trendline. A down trend remains the general direction until this series of lower highs and lower lows is broken.

In technical analysis, An upside penetration of a down trend line is a technical buy signal, and usually the first indication that the bearish direction of crude prices may soon reverse.

Drawing a Downwards Trend Line

When it comes to learning how to draw and learning technical analysis of charts, you need to know that when the market is bearish it forms lower lows & lower highs forming a downwards general market direction. These are the points that are used to draw the down ward trend line.

To draw this downward trend setup we use resistances and to do it correctly two resistances are needed. When price touches this trend line, then we sell and place stop loss just a few pips above the sloping resistances:

How to Trade Downwards Trend Line

When trading with this trend line trading method, this trend line setup will show the general direction of the market as downward therefore traders will only open short sell crude trades. These are the levels where if crude price retraces then these points will provide strong resistance. This is why many short sellers will wait until price retraces up-ward and hits these retracements levels to open sell crude trades. trades opened at these levels have a high Risk to Reward Ratio with minimum draw down.

For Example, in the above example, a trader would have opened short sell signals at the resistance1, resistance2, resistance3 and these sell crude trades would have made a lot of profits with minimum amount of drawdown/retracement.

How to Draw a Downwards Channel

A downward channel is drawn by plotting a line that is parallel to the downward trendline and then adjusting it to touch the bottoms boundary of the price movement. This then forms a down-wards oil channel & as long as the price stays between these 2 channels the general market direction is intact the market direction will continue being bearish.

Trading The Downward Oil Trading Channel

The downward oil channel is used by crude traders to show levels where it is best to take profits. traders will take some profit once the price touches the lower channel and wait for another retracement before opening a short sell trade again.

MT4 Tools For Drawing Oil Trading Channels

The oil tools to draw these oil channels studies on the MT4 crude charts can be found on the Lines Toolbar within the MT4 platform, to access this MT4 tool-bar if it's not activated on your Meta Trader 4 Trading Platform, Click in "View" Next to "File" at the tops left corner of the MT4 Trading Platform and click View, Then Click on Tool Bars, Then Check Lines Tool Bar by clicking on it.

Shown Below is the screenshot of these MT4 tools: just click on this MT4 channels drawing tool and select the point to where you want to place this oil channels tool on the chart.

MetaTrader 4 Technical Analysis Charts - Down-ward Oil Trading Channels

MT4 Toolbar - MT4 Tools for Drawing Oil Trend Lines and Oil Trading Channels used to obtain these trend-line drawing tools is shown above, to draw these trend line setups or oil channels, just select the above Meta Trader 4 trend-line drawing tools shown on the MT4 software and select the two points where you want to draw the down ward trend-line.

This trend line oil strategy is one of the simplest and popular indicators used by crude traders to analyze the market trend direction.