How to Trade a Downtrend
Down trend is when the price of a chart is moving lower & lower. Prices in general close lower than where it is that they opened.
How to Trade Downwards Trend: traders use the down-wards trend direction to open sell trades
Drawing a Downward Trendline
In learning how to draw a downward trend line, you need to know that when market is bearish it forms lower lows & lower highs forming a downwards general trend direction - downwards trend. These are the points that are used to draw a downwards trend line.
To draw downwards trend setup we use resistance levels and to do it correctly two resistance areas are needed. When price touches this down-ward trendline, then we open sell trades and place stop loss just a few pips above the sloping resistances:
How to Trade a Downtrend? - Strategy for Trading a Downward Trend
Trading This Down Trend Market Move
When trading using this down trend method, this downward trend setup will show the general direction of the market as downward therefore traders only will open short sell trades. These resistance levels are the levels where if trading price pulls back then these levels will provide strong resistance. This is why many sellers will wait until trading price retraces up-wards & hits these retracements levels to open sell trades. Trades opened at these levels have a high Reward to Risk Ratio & have little drawdown.
For Example, in the above downwards trend example, a trader would have opened short sell signals at the resistance 1, resistance 2, resistance 3 & these sell trades would have been executed with minimum amount of draw down/retracement.
How to Draw a Downward Gold Channel
A ++3downwards channel is plotted by drawing a line ##2that's parallel to the ##2downward ##2++trendlinetrend--line ##2& then adjusting it to touch the bottom boundary of the price movement. This then forms a channel and as long as the price stays between these two channels the general market down trend direction is intact the market direction will continue to be being bearish.
How to Draw a Downward Channel - Downward Trend Trading Strategy
Trading the Downwards Gold Channel
The downwards channel is used by online traders to show areas where it's best to book profits. Traders will take some profit once the price touches lower channel or the lower channel & wait for another retracement before opening a short sell trade again.
