How to Draw TrendLines and Channels in Gold Charts

Sometimes support & resistance zones are formed diagonally in the same way like a stair case. This forms a price trend which is a sustained movement in one direction either upward or downward.

This trend can be depicted by a trend-line.

A trend line depicts points of support & resistance for the price, depending on the direction of the prices. For an upward moving market a trend-line will show the points of support & for a downwards market the trend line will show areas of resistance. Trend lines are mainly used by investors to identify 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 resistance/support. 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 market move is likely to move to.

A trader who wants to trade Gold metal online using trading analysis must know how to draw & interpret the signals derived/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 3 things about ruling trend, these are:

The overall direction of the price - whether up/down
The power of the current move
Where future support & resistance areas will likely be located

If a trend line forms in a particular direction, then the market mostly moves in that particular direction for a time period until the moment when this trend is broken. When the trend is broken the trend line will also be broken - meaning price will move below an upwards trend line or above a downward trend-line.

Plotting trend-lines on Gold charts illustrates the overall trend of the XAUUSD prices - which can either be upwards or downward.

The illustration below show how to draw trend-lines:

Upward TrendLine

How to Draw Upwards Gold Trading Trendlines and Gold Trading Channels on Gold Trading Charts

Upward Trendline - Upward Trend of XAUUSD Prices

Downwards Trend-Line

How to Draw Downwards Trend Lines and Channels on XAUUSD Trading Charts Explained

Downward Trendline - Downward Trend of XAUUSD Prices

Drawing Trendlines on Gold Trading Charts Using MetaTrader 4 Software Platform

The MetaTrader 4 XAU USD platform software provide trading charting tools for drawing these trend lines on the XAUUSD trading charts. Gold traders can use the drawing tools provided on the MetaTrader 4 platform software just as shown below to draw these trend-lines.

How to Draw Trend-Lines and Channels on XAUUSD Trading Charts

MetaTrader 4 Software Trendline Drawing Tool

To plot trend lines on a Gold chart just click the line drawing tool shown above on the MT4 technical analysis software & choose point A where you want to start drawing the line and then point B where you as a trader want the it to touch. You can also rightclick on the trend line and after right clicking on it, on the "properties" option choose the choice/option to extend its ray by ticking "ray check box", if you don't want to extend it, then untick this option on your MetaTrader 4 platform software. You also can change other properties like colour & width of the trend line on this property settings pop up window.

"The trend is your friend". Is a popular saying among investors because you should never go against the trend. The trend is the most reliable method to trade Gold prices because once the prices start to move in one direction they can continue heading in that particular direction for quite a while - therefore using this method presents and gives you with the best chance to make profits from the online Gold metal trading market.

Principles of How to Draw TrendLines

Use candlestick 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 upwards bullish moving trend is defined by higher highs and higher lows.
The points used to draw are along the highs of the price bars in a downward trend market. A downward bullish move is defined by lower highs & 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 viewed as an entry or an exit signal.
The more often a trend-line is hit but not broken, the more powerful its signal is.

There are two main ways and methods of trading this setup:

Bounce
The Break

Trading Analysis of These 2 MethodsThe trend-line bounce is a continuation signal where the price bounces off this trend line and continue heading in the same direction as the trend line. In an upward trend move, the market will bounce upward after hitting and touching this technical level which is the support zone.

In a downward trend move, the market will bounce downward after hitting and touching this technical level which's the resistance zone.

The trend line break is a reversal signal where the market goes through the trend line & starts moving in the opposite trend market direction.

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

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

In Gold metal trading, both the trend line bounce & the trend line break that are used in technical analysis charts are based upon these technical levels being support and resistance zones.

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

This trend-line method is used to identify good entry and points for exit opening and closing Gold trades, protective stop losses are placed just below or above these trend-lines. The trend-line bounce is a low-risk entry method used by investors & traders to place and open entry trade transactions after the price has retraced but the price is still within the market trend direction. Trades are setup along these trend-line levels & a stop loss order placed just above/below the trend line.

The trend line break is a important trading indicator of possible price trend reversal. When a trend line is broken the price begins to head in the opposite market direction. This provides an early exit signal for investors and traders to exit their open trades and take profits. When there's a penetration of these trend line levels, it is a trading signal that the price may reverse begin going in the opposite trend market direction.

Unlike other analysis indicators there is no formula used to calculate trend-lines, this trend-line setup formation is just drawn between 2 chart points & a gold trader has to learn how to draw these trend-lines on their Gold metal trading charts.

Learn More Guides and Topics:

Trade Forex Trading