How to Draw Commodity Trading Trend Lines & Channels on Commodities Trading Charts
Sometimes support & resistances are formed diagonally in a similar way like a staircase. This forms a commodity trend which is a sustained movement in one direction either upwards or downwards.
A commodity trend line depicts the points of support & resistance for the commodity price, depending on the direction of the market. For an upward moving commodity market trend - trend line will shows the points of support and for a downward moving commodity market trend - trend line will show the areas of resistance - commodity trend lines are mainly used by many traders to determine these resistance and support levels on commodity trading charts.
A Commodity Trading Trend line is a slanting straight line that connects two or more price points and then extends into the future to act as levels of support or resistance. There are two types of commodity trend lines: upward commodity trend line and downward commodity trend line. Commodity Trading trend line is an aspect of Commodity Trading technical analysis that uses commodity line studies to try and predict where the next commodity price move will head to. A trader must know how to draw and interpret signals generated by this trend line tool.
The basis of this commodity technical analysis is based upon the idea that commodity markets move in trends. Commodity Trading trend-lines are used to show three things.
- The general direction of the market - up or down.
- The strength of the current commodity trend - and
- Where future support & resistance will be likely located
If commodity trend lines forms in a certain direction then the commodities trading market usually moves in that direction for a period of time until a time when this commodity trend-line is broken.
Drawing these trendlines on a commodity chart shows the general commodity trend of the commodities trading market which can either be upwards or downward.
Below is example of how to draw these trend lines on commodity trading charts
Tutorial: How to Draw Upwards Commodity Trading Trend Line & Trade Upwards Commodity Trading Trend Move
Course: How to Draw Downwards Commodity Trading Trend-Line and Trade Downward Commodity Trading Trend Move
The MT4 software provides commodity charting tools for drawing these trend lines on commodity charts. To draw commodity trend lines onto a commodities trading chart, commodities traders can use the commodity trading tools provided in MetaTrader 4 software that is displayed below.
To draw commodity trendlines on a commodity chart just click the Commodities MetaTrader 4 Draw Commodity Trading Trend Line Tools as shown above on the MT4 platform technical analysis software and select point A where you want to start plotting the trendline & then point B where you want the trend line to touch. You can also right click in the trend-line & on the properties option select option to extend the ray by ticking the 'ray check box', if you do not want to extend the trendline, then uncheck this option in your MT4 platform. You can also change other commodity trend line properties such as color and width on this property popup window of the trend line properties. You can download MT4 software and learn commodity trendline technical analysis with it.
The commodity trend is your friend. Is a popular saying among traders because you should never go against it. This is most reliable method to trade Commodity Trading because once prices begin to move in one particular direction they can continue moving in that particular direction for quite some time - therefore using this trend method presents opportunity to make profits from the commodities trading market.
Principles of How to Draw Commodity Trading Trend Lines
Use commodity candle stick charts
- The points used to draw the trendline are along the lows of the commodity price bars in a rising commodity market. An upwards bullish commodity trend move is defined by higher highs & higher lows.
- The points used to draw the trendline are along the highs of the commodity price bars in a downward moving market. A downwards bearish commodity trend move is defined by lower highs & lower lows.
- The points used to draw commodity trend lines are extremes points - the high or the low commodity price. These extremes are important because a close beyond the extreme tells investors the commodity trend might be changing. This is an entry or an exit signal.
- The more often a commodity trendline is hit but it is not broken, the more powerful its signal.
There are two main ways of trading this commodity trend-line technical analysis setup:
- The Commodity Trend-Line Bounce - Commodity Trading Trend Line Bounce
- The Commodity Trading Trendline Break - Commodity Trading Trend Line Break
Technical Analysis Methods of Commodity Trading Trend Lines
The commodity trendline bounce is a continuation commodity signal where commodity price bounces off this commodity trend line to continue moving in the same direction. In a downward commodity trend, the commodities trading market will bounce downward after hitting this commodity trend line level which is the resistance level. In an upward commodity trend, the commodities trading market will bounce upwards after hitting this commodity trend line level which is the support level.
The commodity trendline break is a reversal signal where the commodities trading market goes through the trend-line and starts moving in the other opposite direction. When a up commodity trend is broken then the sentiment of the commodities trading market reverses and becomes bearish & when a down commodity trend is broken then the commodities market sentiment reverses & becomes bullish.
For very strong commodity trends, after this commodity trend-line break signal, the commodity price will consolidate for some time before heading in the opposite direction. For short term commodity trends then this commodity trendline break commodity signal will mean commodity price direction may reverse immediately.
In commodity trading, both the trend line bounce and the trendline break that are used in technical analysis charts are based upon these trend line levels being support & resistance areas.
Entry, Exit & Setting stops:
This commodity 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 commodity trend line bounce is a low-risk entry method used by traders to place entry trades after commodity price has retraced. Commodity trades are setup along these trend line levels and a stop loss placed just above or below these trend lines.
The commodity trendline break is a crucial technical indicator of possible commodity trend reversal. When the trend line is broken the commodity price starts move in the opposite direction. This provides an early exit signal for commodities traders to exit their open trades and take profits. When there a penetration of these trend line levels, it is a signal that the commodity price can begin heading in the opposite direction.
Unlike other commodity technical analysis indicators there is no formula used to calculate the trend line, this commodity trend line formation is just plotted between two chart points on the commodities trading chart.
