Downwards Trend Lines and Channels - MetaTrader 4 Tools for Drawing Trend-Lines & 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 downward trend examples we shall use the MT4 technical analysis software charts to illustrate an example of downward trend.

Since price moves downward 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 Trendline on a Downward Trend? - Downward Trend Line MT4

A downtrend occurs when the price makes and forms a series of lower highs & 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 MetaTrader 4 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 downwards 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 trading 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 downward 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 downward 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.

MT4 Tools for Drawing Channels - Downward Channels MT4 Channels Indicator

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

Shown Below is the screen-shot of these MT4 tools: just click on this MetaTrader 4 channels drawing tool and choose the point to where you as a trader want to place this channels tool on the trading chart.

MT4 Analysis Charts - Downward Channels

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

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

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

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