Downwards Trend Lines & Channels - MT4 Tools for Drawing Trend-Lines and Channels

How to Draw Downward Trend-Lines on Charts MT4 Trend Line Indicator

A downwards trend-line is drawn above the downwards trend pattern setup formed by consecutive lower highs, the downwards trend-line must join at least two highs, with the most recent high being lower. For our downwards trend examples we shall use the MT4 technical analysis platform charts to illustrate an example of downwards trend.

Since price moves downwards in a zigzag manner traders usually draw a downward trend-line which shows the general downward direction of the market prices. In market trading analysis, this general price direction is known as the TREND by traders. In analysis definition we can define this down trend line is plotted on a chart showing the resistance levels (bearish direction).

How Do I Draw a Trend-line on a Downward Trend? - Downward Trend Line MT4

A downtrend occurs when the price makes and forms a series of lower highs and lower lows. Each price high is lesser than previous and prior high - lower high, and each low is lower than the previous and prior low - lower low henceforth showing bearish price movement.

Downtrend lines gain more validity each time price touches/tests the downwards trend line but doesn't penetrate the trend-line. A downtrend remains the general direction until this series of lower highs & lower lows is broken.

In analysis, An up side penetration of a downtrend line is a technical buy signal, and generally the first indicator that the bearish direction of prices may soon reverse.

Drawing a Downwards Trend-Line - Downward Trend-Line MT4 Trend-Lines Indicator

In learning how to draw and learning analysis of charts, you need to know that when market is bearish it forms lower lows and lower highs forming a downward general market direction. These are the points that are used to plot the downwards trend-line.

To draw this downward trend set-up we use resistances & to do it correctly 2 resistances are needed. When price touches/tests this trend line, then we sell and place stop loss just a few pips above the sloping resistances:

Drawing a Downward Trend-Line in Forex - Downward Trend Line MT4 Indicator

Trading This Downward Trend Market Move - How to Trade Downward Trend-Line

When trading using this trend-line method, this trend line setup will show the general direction of the price as downwards therefore traders only will open short sell trades. These are the levels and points where if price pulls back/retraces then these levels will give strong and major resistance. This is why many short sellers will wait until price retraces upwards and hits these retracements levels to open sell trade positions. Trades opened at these levels have a high Risk to Reward Ratio with minimum draw down.

For Example, in the above trading exemplification, a forex trader would have opened short sell trading signals at the resistance1, resistance2, resistance3 and these sell trades would have made a lot of profits with minimum amount of drawdown/retracement.

How to Draw a Downward Channel - Downward Channel MT4 Indicator

A downwards channel is drawn by drawing a line that is parallel to the downwards trend-line and then adjusting it to touch bottom boundary of the price movement. This then forms a downwards channel and as long as the remains between these 2 channels the overall general market direction is intact the market direction will continue being bearish.

How Do I Draw a Downward Channel? - Downward Channel MT4 Channel Indicator

the Downward Channel

The downwards channel is used by the traders to show and illustrate levels where it's best to tp orders. Traders will book some profit once the price touches/tests lower channel and wait for another retracement before opening a short sell trade again.

MetaTrader 4 Tools for Drawing Channels - Downward Channels MT4 Channels Indicator

The tools to plot these channels studies on the MT4 charts can be found on the Lines Tool Bar within the MetaTrader 4 platform software, to access this MT4 tool-bar if it is not activated on your MT4 Trade Software, Click in 'View' Next to the 'File' on the top-left corner of the MetaTrader 4 Platform and click View, Then Click in ToolBars, Then Tick Lines Tool-bar by clicking on it.

Shown Below is the screen-shot of these MT4 tools: just click on this MT4 channels drawing tool and choose the point to where you as a trader want to place this channels tool on the chart.

MetaTrader 4 Analysis Charts - Downward Channels

MT4 Trend Lines Tools for Drawing Trend-Lines - Downward Channel MT4 Indicator

MetaTrader 4 Tool-bar - MetaTrader 4 Tools for Drawing Trendlines and Channels used to obtain these trend line drawing tools is displayed above, to draw these trend line set-ups or channels, just select the above MT4 trend line drawing tools shown & displayed on the MetaTrader 4 software and choose the two points where you want to draw the downwards trend-line.

This trend-line trading strategy is one of the simplest and popular indicators used by the traders to analyze and interpret the market trend direction.

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