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