How to Draw Commodities Trend Lines and Channels on Commodities Trading Charts
Sometimes support & resistances are formed diagonally in a similar way like a staircase. This forms a commodity trend which is a sustained movement in one direction either upward or downwards.
A commodity trend line depicts the points of support & resistance for the commodities trading price, depending on the direction of the market. For an upward moving commodity market commodity trend - commodity trend line will shows the points of support and for a downward moving commodity market commodity trend - commodity trend line will show the areas of resistance - commodity trend lines are mainly used by many commodities traders to determine these resistance and support levels on commodities charts.
A Commodities Trend line is a slanting straight line that connects two or more commodities price points and extends into the future to act as a zone of support or resistance for the trading price movement. There are two different types of commodity trend lines: upward commodity trend line and downward commodity trend line. Commodities trend line is an aspect of commodities trading technical analysis that uses commodity line studies to try and predict where the next commodities trading price move will head to. A trader must know how to draw & interpret commodity signals generated by this commodity trend line tool.
The basis of this commodity technical analysis is based upon the idea that commodity markets move in trends. Commodities trend lines are used to show 3 things.
- The general direction of the market - up or down.
- The strength of the current commodity trend - and
- Where future support & resistance will be likely located
If commodity trend lines forms in a certain direction then the commodity market usually moves in that direction for a period of time until a time when this commodity trend line is broken.
Drawing these commodity trendlines on a commodity chart shows the general commodity trend of the commodity market which can either be upwards or downwards.
Below is example of how to draw these commodity trend lines on commodities charts
Guide:How to Draw Upwards Commodities Trend Line & Trade Upwards Commodities Trend Move
Course: How to Draw Commodity Downward Commodities Trendline and Trade Downward Commodities Trend Move
The MetaTrader 4 software provides commodity charting tools for drawing these commodity trend lines on commodities charts. To draw commodity trend lines onto a commodity chart, commodities traders can use the commodity tools provided on the MT4 software that is shown below.
To draw commodity trendlines on a commodity chart just click the Commodity MT4 Draw Commodities Trend Line Tools as shown above on the MT4 platform technical analysis software and select point A where you want to start drawing the commodity trend line & then point B where you want the commodity trend line to touch. You can also right click on commodity trend line and on the properties option select the option to extend its ray by ticking "ray check box", if you do not want to extend the commodity trendline, then uncheck this option in your MT4 commodities trading platform. You can also change other commodity trend line properties such as color and width on this property popup window of the commodity trend line properties. You can download MetaTrader 4 software and learn commodity trendline technical analysis with it.
The commodity trend is your friend. Is a popular saying among traders because you should never go against it. This is most reliable method to trade Commodity because once commodities trading prices start to move in one direction they can continue to move in that particular direction for quite some time - therefore using this commodity trend trading technique presents opportunity to make profits from the commodities trading market.
Principles of How to Draw Commodity Trend Lines
Use commodities candlestick charts
- The points used to draw the commodity trendline are along the lows of the commodities trading price bars in a rising commodities market. An upwards bullish commodity trend move is defined by higher highs & higher lows.
- The points used to draw the commodity trendline are along the highs of the commodities trading price bars in a falling downwards market. A downward bearish commodity trend move is defined by lower highs & lower lows.
- The points used to draw commodity trend lines are extremes points - the high or the low commodities trading price. These extremes are important because a close beyond the extreme tells investors the commodity trend of commodity might be changing. This is an entry or an exit signal.
- The more often a commodity trendline is hit but it is not broken, the more powerful its signal.
There are two main ways of trading this commodity trend line technical analysis setup:
- The Commodities Trend Line Bounce - Commodities Trend Line Bounce
- The Commodities Trendline Break - Commodities Trend Line Break
Technical Analysis Methods of Commodity Trend Lines
The commodity trendline bounce is a continuation commodity signal where commodities trading price bounces off this commodity trend line to continue moving in the same direction. In a downward commodity trend, the commodity market will bounce downward after hitting this commodity trend line level which is the resistance level. In an upward commodity trend, the commodity market will bounce upwards after hitting this commodity trend line level which is the support level.
The commodity trendline break is a reversal commodity signal where the commodity market goes through the commodity trend line and starts moving in the opposite direction. When a commodity up trend is broken then sentiment of the commodity market reverses and becomes bearish and when a commodity down trend is broken then the commodity market sentiment reverses & becomes bullish.
For very strong commodity trends, after this commodity trend line break signal, the commodities trading price will consolidate for some time before heading in the opposite direction. For short term commodity trends then this commodity trendline break commodity signal will mean commodities trading price might reverse direction immediately.
In commodity, both the commodity trend line bounce and the commodity trendline break that are used in technical analysis charts are based upon these commodity trend line levels being support & resistance areas.
Entry, Exit and Setting stops:
This commodity trend line trading method is used to determine good entry and exit points, protective stops are placed just above or below these commodity trend lines. The commodity trend line bounce is a low-risk entry method used by commodities traders to place entry trades after commodities trading price has retraced. Commodities trades are setup along these commodity trend line levels and a stop loss placed just above or below these commodity trend lines.
The commodity trendline break is a crucial technical indicator of possible commodity trend reversal. When the commodity trend line is broken the commodities trading price starts move in the opposite direction. This provides an early exit signal for commodities traders to exit their open trades and take profits. When there a penetration of these commodity trend line levels, it's a signal that the commodities trading price can begin heading in the opposite direction.
Unlike other commodity technical analysis indicators there is no formula used to calculate the commodity trend line, this commodity trend line formation is just plotted between two chart points on the commodities chart.
