Downwards Commodities Trendlines & Channels
How to Draw Downward Commodities Trend Lines on Commodities Trading Charts
A downwards commodity trendline is drawn above the commodity downward trend pattern formed by consecutive lower highs, the downward commodity trendline must connect at least 2 highs, with the most recent high being lower. For our commodity downward trend examples we shall use the MT4 technical analysis software commodity charts to illustrate an example of downward commodities trend.
Since commodities price moves downward in a zigzag manner commodity traders normally draw a downward commodity trendline which shows the general downward direction of the commodities prices. In commodities trading market technical analysis, this general commodities price direction is referred to as the TREND by commodities traders. In commodity technical analysis definition we can define this commodity down trend line is drawn on Commodity Trading chart showing the resistance levels (bearish market direction).
A commodity down trend occurs when the commodities price forms series of lower highs and lower lows. Each price high is lower than previous high - lower high, and each low is lower than the previous low - lower low therefore showing bearish commodities price movement.
Commodity Trading Down commodities trading trend lines gain more validity each time commodities price touches the downwards commodity trend line but does not penetrate the commodity trend-line. A commodity down trend remains the general direction until this series of lower highs and lower lows is broken.
In commodity technical analysis, An upside penetration of a commodity down trend line is a technical buy commodity signal, and usually the first indication that the bearish direction of commodities prices may soon reverse.
Drawing a Downwards Commodity Trend Line
When it comes to learning how to draw & learning commodity technical analysis of commodity charts, you need to know that when the commodity market is bearish it forms lower lows & lower highs forming a downward general market direction. These are the points that are used to plot the downward commodity trend line.
To draw this commodity downward trend setup we use resistances and to do it correctly two resistances are needed. When commodities price touches this commodity trend line, then we sell and place stop loss just a few pips above the sloping resistances:
Trading This Downward Commodities Trend Market Move
When trading with this commodity trend line trading method, this commodity trend line setup will show the general direction of the market as downward therefore commodity traders will only open short sell commodities trades. These are the levels where if commodities price retraces then these points will provide strong resistance. This is why many short sellers will wait until commodities price retraces upward & hits these retracements levels to open sell commodities trades. Commodities trades opened at these levels have a high Risk to Reward Ratio with minimum draw down.
For Example, in the above commodity example, a trader would have opened short sell commodity signals at the resistance1, resistance2, resistance3 and these sell commodities trades would have made a lot of profits with minimum amount of draw-down/retracement.
How to Draw a Commodities Downward Channel
A commodity downward channel is drawn by plotting a line that is parallel to the downwards commodity trendline & then adjusting it to touch the bottom boundary of the commodities price movement. This then forms a downwards commodity channel & as long as the commodities price stays between these 2 channels the general commodity market direction is intact the commodity market direction will continue being bearish.
Trading The Downward Commodity Trading Channel
The downward commodity channel is used by commodities traders to show levels where it is best to take profits. Commodities traders will take some profit once the commodities price touches the lower channel and wait for another retracement before opening a short sell commodities trading again.
MT4 Tools For Drawing Commodities Trading Channels
The commodity tools to draw these commodity channels studies on the MT4 commodities charts can be found on the Lines Toolbar within the MT4 commodities trading platform, to access this MT4 tool bar if it is not activated on your MT4 Commodity Trading Platform, Click in "View" Next to "File" at the tops left corner of the MT4 Commodities Trading Software and click View, Then Click on Toolbars, Then Check the Lines Toolbar by clicking on it.
Below is the screenshot of these MT4 tools: just click on this MT4 channels drawing tool and select the point to where you want to place this commodity channels tool on the commodities chart.
MT4 Technical Analysis Charts - Downward Commodity Trading Channels
MT4 Toolbar - MT4 Tools for Drawing Commodity Trend Lines and Commodities Trading Channels used to obtain these commodity trend line drawing tools is shown above, to draw these commodity trend line setups or commodity channels, just select the above MT4 commodity trend line drawing tools shown on the MT4 software and select the two points where you want to draw the commodity downward trend line.
This commodity trend line commodity strategy is one of the simplest and popular commodity technical indicators used by commodities traders to analyze the commodity market commodity trend direction.
