MT4 Tools for Drawing Trendlines and Stock Channels

Downwards Trendline MetaTrader 4 Stock Trend Line Indicator

A downward stock trendline is plotted above the down-wards trend setup formed by consecutive lower highs, the downwards trendline must connect at-least two highs, with the most recent high being lower. For our downward trend examples we shall use the MetaTrader 4 analysis software charts to illustrate example of downward trend.

Since stock price moves downwards in a zigzag manner stock traders normally draw a downward stock trendline which shows the general downward direction of the stock prices. In stock trading market analysis, this general stock price direction is referred to as the TREND by traders. In technical analysis definition we can define this down trendline is plotted on chart showing the resistance areas (bearish market direction).

A stock down trend forms when the price forms series of lower highs & lower lows. Each price high is lower than previous high - lower high, & each low is lower than previous low - lower low therefore showing bearish stock price movement.

Stock Indices Down stock trendlines gain more validity each time stock price touches the downwards trendline but doesn't penetrate the trendline. A down trend remains the general direction until this series of lower highs and lower lows is broken.

In technical analysis, An up side penetration of a down trend line is a technical buy signal, and usually the first indication that the bearish direction of stock prices may soon reverse.

Downward Stock Trendline MetaTrader 4 Stock Trend Lines Indicator

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

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

How to Trade Downwards Trend Line

When trading with this trend line method, this trend line setup will show the general direction of the market as downwards therefore stock traders will only open short sell stock trades. These are the levels where if stock price retraces then these points will provide strong resistance. This is why many short sellers will wait until stock price retraces upward and hits these retracements levels to open sell stock trades. Indices trades opened at these levels have a high Risk to Reward Ratio with minimum draw down.

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

Downwards Stock Channel MetaTrader 4 Channel Indicator

A stock downward channel is plotted by drawing a line that is parallel to the downwards trendline & then adjusting it to touch the bottoms boundary of the stock price movement. This then forms a downward stock indices channel & as long as a price stays between these two channels the general market direction is intact the market direction will continue being bearish.

Trading the Downwards Stock Channel

The downward stock indices channel is used by traders to show levels where it's best to take profits. Traders will take some profit once the stock price touches the lower channel & wait for another retracement before opening a short sell stock trade again.

Downwards Stock Channels MetaTrader 4 Channels Indicator

The tools to draw these channels studies on the MetaTrader 4 charts can be found on the Lines Toolbar within the MetaTrader 4 platform, to access this MT4 tool bar if it is not activated on your MetaTrader 4 Stock Platform, Click in "View" Next to "File" at the top left corner of the MT4 Stock Platform & click View, Then Click on the Toolbars, 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 channels tool on the stock chart.

MT4 Technical Analysis Charts - Downward Stock Channels

MT4 Toolbar - MetaTrader 4 Tools for Drawing Trend Lines & Stock Channels used to obtain these trendline drawing tools is shown above, to draw these trend line setups or channels, just select the above MetaTrader 4 stock trendline drawing tools shown on the MetaTrader 4 software and select the two points where you want to draw the downwards trend line.

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