Drawing Upward Trend Lines and Channels
An upward trendline is a line drawn on the XAUUSD chart when the overall trend of the prices is moving upwards and therefore this line is drawn below these upward trending prices by connecting at least 2 lows of the upwards price trend. This line will show the overall trend of the market to be upwards.
The example illustration exhibited below explains this trading concept & describes and explains how the prices move when in an upward trend. When the market is moving up it keeps forming new support areas as it moves upwards and these support areas are the ones used to draw the upwards trend line.
Because the market heads in a zigzag kind of manner, traders will normally draw a trend which shows the general upward trending direction.
Upwards Trending Market
An upward trend occurs when prices of Gold keep making consecutive higher highs and higher lows. Every high is higher than the prior high - higher high, and each low is higher than the previous low - higher low.
The Upward trend lines gain more validity each time the price of Gold touches the line but doesn't penetrate it. An uptrend remains in play until this series of higher highs and higher lows is broken.
A down side penetration of an upward trend line is a trading sell trading signal, & is normally the first indicator that an uptrend may soon end or begin to consolidate.
Drawing an upward Trend Line
When the online Gold metal market moves upward it forms higher highs & higher lows forming a bullish price movement. An upward trendline then can be plotted by joining the higher lows.
To draw this setup we use support levels made by the prices. To draw an upward trend line correctly 2 support levels are needed. When price tests/touches this upward trendline we buy and place a stop loss just a few pips below this trend line. The diagram below shows an example of an upward trendline.
Upward Trend Line - Gold Trading
The trend line setup will show the general direction of the Gold market as bullish therefore traders only will open buy trades as long as price movement is within this setup & within the support levels. These are the levels where if the market price retraces then these points will offer strong supports for the price. This is why many buyers will wait until price retraces downward & hits these retracements areas to open buy trade trade transactions.
Trades opened at these levels have a very high Risk: Reward Ratio and are very profitable.
In the above setup the trader would have opened buy/long trades from the trading signals derived/generated at the support1, support2, support3 & these trades would have made a lot of profits with minimum amount of downdraw down/retracement. This is why many traders like to trade using this trend line trading setup.
Drawing Upwards Channel
An upward channel is drawn by drawing a line that's parallel to the upwards trend line and then this new line is adjusted to touch the top boundary of the market price movement. This then forms a channel of the price & as long as the stays and remains in between the 2 channels the bullish price movement of XAUUSD prices will continue heading up.
Upward Channel - Gold Trading
Trading the Upward XAUUSD Prices Channel
This upward channel is used by Gold traders to show levels where it best to take profit orders. Gold traders will take some profit once the price touches upper channel and wait for another price retracement before opening another buy trade position again.
MT4 Tools for Drawing Upward Trend Line and Channels
The tools to plot these setups in the MetaTrader 4 are located on the MT4 drawing tool bar within the MT4 software, to access this tool bar if it is not activated in your platform, Press in "View" Next to the "File" at the left top corner of MetaTrader 4 & click "View", Then Click on "Tool Bars", Then Check & choose the "Lines Tool Bar" by pressing on it.
Below is the screen shot of the MT4 trend lines drawing tool bar. To draw a trend line on a Gold trading chart just click on this tool & select the point where you want to draw.
MT4 Tool-Bar for Drawing Upward Trendline & Channels
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- XAUUSD Stop Loss Calculator Excel
- How Can I Use MT4 Trade Gold Platform for iPhone?
- What's Margin Level on MetaTrader 5 Trading Software?
- How Can I Add XAUUSD Volumes Trading Indicator on XAUUSD Chart?
- How Can I Analyze a Gold Trend with a Gold Trendline?
- Choosing the Right Analysis XAUUSD Strategy for Beginner Traders
