How to Draw Trendlines & Channels on Charts

Sometimes support and resistances are formed diagonally in a similar way like a stair case. This forms a cfd trend which is a sustained movement in one direction either up-wards or down-wards.

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

A Trend line is a slanting straight line that connects two or more price points then extend into the future to act as areas of support or resistance. There are two types of trend lines: upward trend line and downward trend line. trendline is an aspect of trading analysis that uses cfd line studies to try & predict where the next price move will head to. A trader must know how to draw & interpret signals generated by this trend line tool.

The basis of this technical analysis is based upon the idea that markets move in trends. trendlines are used to show 3 things.

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

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

Drawing these cfd trendlines on a cfd chart highlights the general cfd trend of the cfd market which can either be upward or downward.

Below is example of how to draw these cfd trend lines on charts

Tutorial:How to Draw Upwards Trendline and Trade Upward Trend Move

Guide: How to Draw CFD Trading Downwards Trendline & Trade Downwards Trend Move

The MT4 software provides charting tools for drawing these cfd trend lines on charts. To draw trend-lines onto a cfd chart, traders can use the cfd tools provided on the MT4 software that is shown below.

To draw trendlines on a cfd chart just click the CFD MT4 Draw Trend Line Tools as shown above on the MT4 platform technical analysis software and select point A where you want to start drawing the cfd trend line and then point B where you want the cfd trend-line to touch. You can also right-click on the cfd trend-line & on the properties option choose the option to extend its ray by ticking "ray check box", if you don't want to extend the cfd trendline, then uncheck this option in your MT4 trading platform. You can also change other trend-line properties such as color & width on this property popup window of the cfd trend-line properties. You can download MT4 software and learn trend-line technical analysis with it.

The cfd trend is your friend. Is a popular saying among traders because you should never go against it. This is the most reliable strategy to trade CFD because once cfd prices begin to move in one direction they can continue to move in that particular direction for quite some time - therefore using this trend technique presents opportunity to make profits from the trading market.

Principles of How to Draw CFDs Trend-Lines

1. Use candle charts

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

There are two main ways of trading this trendline technical analysis setup:

1. The CFD Trendline Bounce - Trend Line Bounce
2. The CFD Trendline Break - Trendline Break

Analysis Methods of Trend Lines

The cfd trend-line bounce is a continuation signal where price bounces off this trend line to continue moving in the same direction. In a downward trend, the cfd market will bounce down-wards after hitting this trend line level which is the resistance level. In an upward trend, the cfd market will bounce up-wards after hitting this trend line level which is the support level.

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

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

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

Entry, Exit & Setting stops:

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

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

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