Downwards Trend Lines and Channels

How to Draw Downward Trend-Lines on Charts

A downward trend line is drawn above the down-wards trend setup formed by consecutive lower highs, the downwards trendline must join at least two highs, with the recent most high being lower. For our xauusd downward trend illustrations we shall use the MT4 analysis software charts to illustrate example of downward trend.

Because prices usually go down in a back-and-forth pattern, traders often draw a line going downwards to show the overall direction of the prices. Traders call this general direction of the gold price the TREND when they are looking at the market. When we talk about analyzing the market, we can say that this downward line is drawn on a trading chart to show where the price is likely to stop rising and start falling (a bearish market direction).

How to Draw Downwards Trendlines on Charts - Simple Trend Following Strategies

A downtrend happens when the price makes a series of lower highs and lower lows. Each price high is less than the one before it (lower high), and each low is less than the one before it (lower low), which shows the price is generally going down.

XAUUSD down trendlines grow stronger each time price hits but stays above them. The downtrend holds until lower highs and lows end.

In technical analysis, when price breaks above a down trend-line, that's your buy signal and usually the first sign that a bearish gold trend could flip.

Drawing a Downwards Trend Line

When learning to draw and study technical analysis of charts, you need to know that when the market is going down, it makes lower lows and lower highs, showing a general market direction downwards. These points are used to mark the downward trend line.

To sketch out a downward trend, you need resistance lines - two of them, to be exact. When the price bumps into this trendline, that's your cue to sell. Just remember to set your stop loss a few pips above the sloping resistance.

How Do I Draw Downwards Trend Lines on Charts? - How Do I Analyze Downwards Trend on Chart?

How Do I Trade Downwards Trend Line

When using this trendline method, the trendline setup will show that the price is generally going down, so traders will only make trades to sell gold. These are the points where, if the gold price goes back up, they will act as strong barriers. That's why many sellers will wait for the gold price to go up a bit and reach these barrier levels before selling gold. Trades done at these points have a good chance of making more money than they risk, with little loss.

For instance, in the preceding scenario, a gold trader initiating short sell signals at resistance1, resistance2, and resistance3 would have realized substantial profits with minimal drawdown or retracement encountered along the way.

How Do I Draw a Downwards Channel

A channel going down is made by drawing a line that goes the same way as the downward trend-line and then moving it to touch the bottom of the price movement. This makes a downward channel, and as long as it stays between these 2 channels, the market direction is still intact, and the market will keep going down.

How to Draw a Downward Channel

Trading the Downwards Channel

The downwards channel is used by online traders to show levels where it's 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 gold trade again.

MT4 Tools for Drawing Channels

The tools to draw these channels studies on the MT4 charts can be found on the Lines Tool Bar within the MT4 software, to access this MT4 tool-bar if it isn't activated on your MT4 Software Platform, Press in "View" Next to the "File" on the top left corner of the MT4 Platform and click View, Then Click in the Tool Bars, Then Tick the Lines Tool Bar by clicking on it.

Here is a picture showing the MT4 tools: just click on the MT4 channels tool and pick the spot where you, as a trader, want to put it on the chart.

MT4 Technical Analysis Charts - Downwards Channels

How to Draw Downwards Trend Lines on Charts - Placing Trend-Line on Chart Explained

MT4 Toolbar - MT4 Tools for Drawing TrendLines and Channels used to obtain these trendline drawing tools is displayed above, to draw these trendline set-ups or channels, just choose & select the above MT4 trend line drawing tools displayed & shown on the MT4 software and choose the2 points where you want to draw the downwards trend-line.

This trendline strategy represents one of the most straightforward and commonly utilized indicators utilized by online traders for the purpose of interpreting and analyzing price trend direction.

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