Downward XAUUSD Trend Lines and Channels
How to Draw Downward XAUUSD Trend Lines on Gold Charts
A downward xauusd trend line is drawn above the downward trend pattern formed by consecutive lower highs, the downward xauusd trend line must connect at least two highs, with the most recent high being lower. For our xauusd downward trend examples we shall use the MetaTrader 4 technical analysis software xauusd charts to illustrate an example of downward gold trend.
Since gold price moves down in a zigzag manner xauusd traders normally draw a downward xauusd trend line which shows the general downward direction of the gold prices. In xauusd market technical analysis, this general gold price direction is referred to as the TREND by traders. In xauusd technical analysis definition we can define this xauusd down trend line is drawn on a XAUUSD chart showing the resistance levels (bearish market direction).
A xauusd down trend occurs when the price forms series of lower highs and lower lows. Each price high is lower than the previous high - lower high, and each low is lower than the previous low - lower low therefore showing bearish gold price movement.
XAUUSD Trading Down xauusd trend lines gain more validity each time gold price touches the downward xauusd trend line but does not penetrate the trend line. A down trend remains the general direction until this series of lower highs and lower lows is broken.
In xauusd technical analysis, An upside penetration of a xauusd down trend line is a technical buy signal, and usually the first indication that the bearish direction of gold prices may soon reverse.
Drawing a Downward XAUUSD Trend Line
When it comes to learning how to draw and learning xauusd technical analysis of xauusd charts, you need to know that when the xauusd market is bearish it forms lower lows and lower highs forming a downward general market direction. These are the points that are used to draw the downward xauusd trend line.
To draw this downward trend setup we use resistances and to do it correctly two resistances are needed. When gold price touches this xauusd trend line, then we sell and place stop loss just a few pips above the sloping resistances:
How to Trade Downward XAUUSD Trend Line
When trading with this xauusd trend line trading method, this xauusd trend line setup will show the general direction of the xauusd market as downwards therefore xauusd traders will only open short sell gold trades. These are the levels where if gold price retraces then these points will provide strong resistance. This is why many short sellers will wait until gold price retraces upwards and hits these retracements levels to open sell gold trades. XAUUSD trades opened at these levels have a high Risk to Reward Ratio with minimum draw down.
For Example, in the above xauusd example, a xauusd trader would have opened short sell signals at the resistance1, resistance2, resistance3 and these sell gold trades would have made a lot of profits with minimum amount of draw-down/retracement.
How to Draw a XAUUSD Downward Channel
A xauusd downward channel is drawn by drawing a line that is parallel to the downward xauusd trend line and then adjusting it to touch the bottom boundary of the gold price movement. This then forms a downward xauusd channel and as long as the price stays between these two channels the general xauusd market direction is intact the xauusd market direction will continue being bearish.
Trading the Downward XAUUSD Channel
The downward xauusd channel is used by traders to show levels where it is best to take profits. Traders will take some profit once the gold price touches the lower channel and wait for another retracement before opening a short sell gold trading again.
MetaTrader 4 Tools for Drawing XAUUSD Channels
The xauusd tools to draw these xauusd channels studies on the MetaTrader 4 gold charts can be found on the Lines Toolbar within the MetaTrader 4 platform, to access this MT4 tool bar if it is not activated on your MetaTrader 4 XAUUSD Platform, Click in "View" Next to "File" at the top left corner of the MetaTrader 4 XAUUSD Platform and click View, Then Click on Tool bars, Then Check the Lines Toolbar by clicking on it.
Below is the screenshot of these MetaTrader 4 tools: just click on this MT4 channels drawing tool and select the point to where you want to place this xauusd channels tool on the gold chart.
MetaTrader 4 Technical Analysis Charts - Downward XAUUSD Channels
MetaTrader 4 Toolbar - MetaTrader 4 Tools for Drawing XAUUSD Trend Lines and XAUUSD Channels used to obtain these trend line drawing tools is shown above, to draw these trend line setups or xauusd channels, just select the above MetaTrader 4 xauusd trend line drawing tools shown on the MetaTrader 4 software and select the two points where you want to draw the downward trend line.
This xauusd trend line xauusd strategy is one of the simplest and popular xauusd technical indicators used by traders to analyze the xauusd market xauusd trend direction.
