How to Draw Stock Indices Trend Lines and Channels on Stock Index Charts

Sometimes support and resistances are formed diagonally in a similar way like a staircase. This forms a stock indices trend which is a sustained movement in one direction either upwards or downwards.

A stock indices trend line depicts the points of support and resistance for the stock index price, depending on the direction of the stock index market. For an upward moving stock indices market stock indices trend - the stock indices trend line will shows the points of support and for a downward moving stock indices market stock indices trend - the stock indices trend line will show the areas of resistance - stock indices trend lines are mainly used by many stock index traders to determine these resistance and support levels on stock index charts.

A Stock Indices Trend line is a slanting straight line that connects two or more stock index price points and then extends into the future to act as a level of support or resistance. There are two different types of stock indices trend lines: upward stock indices trend line and downward stock indices trend line. Stock Indices trend line is an aspect of stock index technical analysis that uses stock indices line studies to try and predict where the next stock index price move will head to. A stock indices trader must know how to draw and interpret stock indices signals generated by this stock indices trend line tool.

The basis of this stock indices technical analysis is based upon the idea that stock indices markets move in trends. Stock Indices trend lines are used to show three things.

• The general direction of the stock indices market - up or down.
• The strength of the current stock indices trend - and
• Where future support and resistance will be likely located

If stock indices trend lines forms in a certain direction then the stock indices market usually moves in that direction for a period of time until a time when this stock indices trend line is broken.

Drawing these stock indices trend lines on a stock indices chart shows the general stock indices trend of the stock indices market which can either be upward or downward.

Below is an example of how to draw these stock indices trend lines on stock index charts

Tutorial: How to Draw Upward Stock Indices Trend Line and Trade Upward Stock Indices Trend Move

Tutorial: How to Draw Stock Indices Downward Stock Indices Trend Line and Trade Downward Stock Indices Trend Move

The MetaTrader 4 software provides stock indices charting tools for drawing these stock indices trend lines on stock index charts. To draw stock indices trend lines onto a stock indices chart, stock index traders can use the stock indices tools provided on the MetaTrader 4 software that is shown below.

To draw stock indices trend lines on a stock indices chart just click the Stock Indices Trading MetaTrader 4 Draw Stock Indices Trend Line Tools as shown above on the MetaTrader 4 platform technical analysis software and select point A where you want to start drawing the stock indices trend line and then point B where you want the stock indices trend line to touch. You can also right click on the stock indices trend line and on the properties option select the option to extend its ray by ticking the "ray check box", if you do not want to extend the stock indices trend line, then uncheck this option in your MetaTrader 4 platform. You can also change other stock indices trend line properties such as color and width on this property popup window of the stock indices trend line properties. You can download MetaTrader 4 software and learn stock indices trend line technical analysis with it.

The stock indices trend is your friend. Is a popular saying among investors because you should never go against it. This is the most reliable method to trade Stock Indices Trading because once stock indices prices start to move in one direction they can move in that particular direction for quite some time - therefore using this stock indices trend trading method presents opportunity to make profits from the stock index trading market.

Principles of How to Draw Stock Indices Trend Lines

1. Use candlestick stock indices charts

2. The points used to draw the stock indices trendline are along the lows of the stock index price bars in a rising stock indices market. An upward bullish stock indices trend move is defined by higher highs and higher lows.
3. The points used to draw the stock indices trend line are along the highs of the stock index price bars in a falling market. A downward bearish stock indices trend move is defined by lower highs and lower lows.
4. The points used to draw stock indices trend lines are extremes points - the high or the low stock index price. These extremes are important because a close beyond the extreme tells investors the stock indices trend of stock indices might be changing. This is an entry or an exit signal.
5. The more often a stock indices trend line is hit but not broken, the more powerful its signal.

There are two main ways of trading this stock indices trend line technical analysis setup:

1. The Stock Indices Trend Line Bounce - Stock Indices Trend Line Bounce
2. The Stock Indices Trend Line Break - Stock Indices Trend Line Break

Technical Analysis Methods of Stock Indices Trend Lines

The stock indices trend line bounce is a continuation stock indices signal where stock index price bounces off this stock indices trend line to continue moving in the same direction. In a downward stock indices trend, the stock indices market will bounce downwards after hitting this stock indices trend line level which is the resistance level. In an upward stock indices trend, the stock indices market will bounce upwards after hitting this stock indices trend line level which is the support level.

The stock indices trend line break is a reversal stock indices signal where the stock indices market goes through the stock indices trend line and starts moving in the opposite direction. When a stock indices up trend is broken then the sentiment of the stock indices market reverses and becomes bearish and when a stock indices down trend is broken then the stock indices market sentiment reverses and becomes bullish.

For very strong stock indices trends, after this stock indices trend line break signal, the stock index price will consolidate for some time before moving in the opposite direction. For short term stock indices trends then this stock indices trend line break stock indices signal will mean stock index price may reverse immediately.

In stock indices, both the stock indices trend line bounce and the stock indices trend line break that are used in technical analysis charts are based upon these stock indices trend line levels being support and resistance levels.

Entry, Exit and Setting stops:

This stock indices trend line trading method is used to determine good entry and exit points, protective stops are placed just above or below these stock indices trend lines. The stock indices trend line bounce is a low-risk entry method used by stock index traders to place entry trades after stock index price has retraced. Indices trades are setup along these stock indices trend line levels and a stop loss placed just above or below these stock indices trend lines.

The stock indices trend line break is a crucial indicator of possible stock indices trend reversal. When the stock indices trend line is broken the stock index price starts move in the opposite direction. This provides an early exit signal for stock index traders to exit their open trades and take profits. When there a penetration of these stock indices trend line levels, it is a signal that the stock index price can start moving in the opposite direction.

Unlike other stock indices technical analysis indicators there is no formula used to calculate the stock indices trend line, this stock indices trend line formation is just drawn between two chart points on the stock index chart.