How to Draw Trend Lines & Channels on Charts

Sometimes support & resistances are formed diagonally in a similar way like a stair-case. This forms a xauusd trend which is a sustained movement in one direction either upward or downward.

A trend line depicts the points of support & resistance for the trading price, depending on the direction of the market. For an upward moving xauusd market xauusd trend - trend line will shows the points of support and for a downward moving xauusd market xauusd trend - trend line will show the areas of resistance - trend lines are mainly used by many traders to determine these resistance and support levels on charts.

A Trend line is a slanting straight line that connects two or more price points and extends into the future to act as a zone of support or resistance for the price movement. There are 2 types of xauusd trend lines: upward xauusd trend line and downward xauusd trend line. trend-line is an aspect of trading analysis that uses xauusd line studies to try & predict where the next 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 xauusd analysis is based upon the idea that xauusd markets move in trends. trend-lines are used to show 3 things.

• The general direction of the market - up or down.
• The strength of the current xauusd trend - and
• Where future support & resistance will be likely located

If xauusd trend lines forms in a certain direction then the market usually moves in that direction for a period of time until a time when this xauusd trend line is broken.

Drawing these trend lines on a xauusd chart portrays the general xauusd trend of the market which can either be upward or down-ward.

Below is an example of how to draw these trend lines on charts

Guide: How to Draw Up-ward Trend Line and Trade Upward Trend Move

Guide: How to Draw Downwards Trend Line & Trade Downwards Trend Move

The MT4 software provides xauusd charting tools for drawing these trend lines on charts. To draw trend lines onto a xauusd chart, gold traders can use the tools provided on the MetaTrader 4 software that is shown below.

To draw trend lines on a xauusd chart just click the XAUUSD Meta Trader 4 Draw Trend Line Tools as shown above on the MetaTrader 4 platform technical analysis software and select point A where you want to start plotting the trend line and then point B where you want the trend line to touch. You can also right-click in trend line & on the properties option select option to extend ray by checking the 'ray check box', if you don't want to extend the trend line, then untick this option in your MetaTrader 4 platform. You can also change other xauusd 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 xauusd trend line analysis with it.

The xauusd trend is your friend. Is a popular saying among traders because you should never go against it. This is the most reliable technique to trade XAUUSD because once prices begin to head in one specific direction they can move in that specific direction for some time - therefore using this market trend strategy presents an opportunity to make profits from the market.

Principles of How to Draw Gold Trendlines

1. Use candle charts

2. The points used to draw the trend line are along the lows of the price bars in a rising market. An upward bullish xauusd trend move is defined by higher highs & higher lows.
3. The points used to draw the trend line are along the highs of the price bars in a falling downward market. A downward bearish xauusd trend move is defined by lower highs and lower lows.
4. The points used to draw trend lines are extremes points - the high or the low gold price. These extremes are important because a close beyond the extreme tells investors the trend of xauusd might be changing. This is an entry or an exit signal.
5. The more often a xauusd trend line is hit but it is not broken, the more powerful its signal.

There are 2 main ways of trading this xauusd trend line analysis set-up:

1. The Trend-Line Bounce - Trend Line Bounce
2. The Trend Line Break - Trend Line Break

Analysis Methods of Trendlines

The xauusd trend line bounce is a continuation xauusd signal where price bounces off this xauusd trend line to continue moving in the same direction. In a downward xauusd trend, the market will bounce downwards after hitting this xauusd trend line level which is the resistance level. In an upward xauusd trend, the market will bounce upward after hitting this xauusd trend line level which is the support level.

The xauusd trend line break is a reversal signal where the market moves through the trend line & starts heading in the opposite market direction. When a xauusd up trend is broken then the sentiment of the market reverses & becomes bearish and when a xauusd down trend is broken then the market sentiment reverses & becomes bullish.

For very strong xauusd trends, after this xauusd trend line break signal, the price will consolidate for some time before moving in the opposite market direction. For short term xauusd trends then this xauusd trendline break signal will mean price may reverse direction immediately.

In xauusd, both the trend line bounce & the trendline break that are used in analysis charts are based upon these trend line levels being support & resistance levels.

Entry, Exit & Setting stops:

This xauusd trend line method is used to determine good entry and exit points, protective stops are placed just above or below these trend lines. The xauusd trend line bounce is a low-risk entry strategy used by traders to place entry trades after price has retraced. trades are setup along these trend line levels and a stop loss placed just above or below these trend lines.

The xauusd trend line break is a crucial indicator of possible xauusd trend reversal. When the trend line is broken the price starts move in the opposite market direction. This provides an early exit signal for traders to exit their open trades and take profits. When there a penetration of these trend line levels, it is a signal that the price can begin moving in the opposite direction.

Unlike other xauusd analysis indicators there is no formula used to calculate the trend line, this xauusd trend line formation is just drawn between two chart points on the chart.