Trade Bitcoin Trading

Drawing Downward Trend lines and Channels

A downward trend line on a Bitcoin chart is drawn above prices that are generally moving lower. Just connect at least two swing highs in a downtrend. This line shows you that the overall market direction is down.

The example below shows how prices act in a downtrend. As the market falls, it creates new resistance zones. Connect these levels to draw the downtrend line.

Since the market tends to move in a zigzag pattern, BTCUSD traders usually draw a trend line that indicates the overall downward trend.

Draw Downward Bitcoin Trendlines and Channels - Bitcoin Chart Trend Tools

Down-ward Trending Market

The price of Bitcoin is declining when it consistently hits lower lows and lower highs. The price of Bitcoin is exhibiting a bearish trend since each peak is lower than the previous peak (lower high) and each low is lower than the previous low (lower low).

Downward trendlines gain confirmation with each instance the price contacts these boundaries without breaking through. The overall market direction remains downward as long as the established pattern of successively lower peaks and valleys is maintained.

In analysis, breaking above a downtrend line signals a buy. It often means bitcoin prices may reverse from bearish or pause.

Drawing a Downward Trend Line on Bitcoin Price Chart

A bearish market movement occurs when the Bitcoin price forms lower lows and lower highs. A downward trendline can be drawn by linking consecutive lower highs.

To draw this setup we use resistance levels made by the Bitcoin prices. To draw a downward trend line correctly two resistance levels are needed. When price touches this downward trend-line we buy & place a stoploss order just a couple of pips above this trendline. The diagram below shows an example of a downward trend-line.

How to Draw Downward Trendlines and Bitcoin Channels on Your Charts

Down-ward Trend-Line - Bitcoin Trading

The current trendline configuration suggests an overall bearish trajectory for the Bitcoin market: consequently, traders should only initiate sell trade positions while the price action remains confined within this configuration and respects the established resistance levels. These specific price points serve as areas where, should the market experience a pullback, they will offer substantial resistance to further upward movement. This is precisely why many sellers elect to wait for the price to rally higher and encounter these retracement zones before entering sell trades. Trades initiated at these defined levels typically offer a superior Risk: Reward Ratio and are often highly lucrative.

In the above setup a trader would have opened sell/short trades from the signals generated at the resistance1, resistance2, resistance3 and these trades would have made a lot of profits with minimum amount of drawdown. This is why many Bitcoin traders like to trade using this trend line trade setup.

Drawing Downwards Channel

To craft a downward channel, one plots a line parallel to the existing downward trendline and adjusts it to touch the lower boundary of Bitcoin's price activity. This formation of a price channel signifies that, while Bitcoin remains between these two channels, its market movement is likely to continue trending downward.

How to Draw Downward Sloping Channels on Bitcoin Price Charts

Down-ward Channel - Bitcoin Trading

Trading the Downward Bitcoin Prices Channel

Bitcoin traders use this Downwards channel to display the levels at which it is ideal to execute profit orders. Bitcoin BTCUSD traders will wait for another retracement before initiating another sell trade after the price reaches the lower channel, at which point they will seize some profit.

Tools in MetaTrader 5 for drawing downward trend lines and channels

The tools to plot these trend line setups on the MT5 are located on the MT5 lines drawing toolbar within the MT5 platform - to access this tool-bar if it is not activated in your Bitcoin MT5 platform, Click in 'View' Next to the 'File' at the left top corner of MT5 and click 'View', Then Click on 'ToolBars', Then Tick and choose the "Lines ToolBar" by clicking on it.

Shown Below is the screenshot of the MT5 trend-lines drawing toolbar. To draw a trend line on a BTCUSD chart just click on this tool and choose the point where you as the trader want to draw.

Instruction for Mapping Downward Trend-lines and Constructing Downwards Bitcoin Channels

MT5 Toolbar for Drawing Downwards Trendline and Channels

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