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

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

A downwards trendline is drawn above the downward trend pattern formed by consecutive lower highs, the downwards trend line must connect 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 normally draw a downward trendline which shows the general downward direction of the prices. In market technical analysis, this general price direction is referred to 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 market direction).

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

Downtrend lines gain more validity each time price touches the downward trend line but does not penetrate the trendline. A downtrend remains the general direction until this series of lower highs and lower lows is broken.

In analysis, An upside penetration of a downtrend line is a technical buy signal, and usually the first indication that the bearish direction of prices may soon reverse.

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

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

To draw this downward trend setup we use resistances and to do it correctly two resistances are needed. When price touches this trend line, then we sell and place stop loss just a few pips above the sloping resistances:

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

When trading with this trend line trading method, this trend line setup will show the general direction of the market as downwards therefore traders will only open short sell 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 trades. Trades opened at these levels have a high Risk to Reward Ratio with minimum draw down.

For Example, in the above trading example, a trader would have opened short sell 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 downward channel is drawn by plotting a line that is parallel to the downwards trend line and then adjusting it to touch the bottoms boundary of the price movement. This then forms a downward channel and as long as price stays between these 2 channels the general market direction is intact the market direction will continue being bearish.

the Downward Channel

The downward channel is used by traders to show levels where it's 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.

MT4 Tools for Drawing Channels - Downward Channels MT4 Channels Indicator

The tools to draw these channels studies on the MT4 charts can be found on the Lines Toolbar within the MT4 platform, to access this MetaTrader 4 toolbar if it is not activated on your Meta Trader 4 Trading Platform, Click in 'View' Next to 'File' at the tops left corner of the MT4 Software & click View, Then Click on Tool Bars, Then Check Lines Tool Bar by clicking on it.

Shown Below is the screenshot of these MT4 tools: just click on this MT4 channels drawing tool and select the point to where you want to place this channels tool on the chart.

MT4 Analysis Charts - Downward Channels

MT4 Toolbar - MT4 Tools for Drawing Trendlines & Channels used to obtain these trend line drawing tools is shown above, to draw these trend line setups or channels, just choose the above MetaTrader 4 trend-line drawing tools shown on the MT4 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 traders to analyze the market trend direction.