Downward Trend Lines and Channels - MetaTrader 4 Tools for Drawing Trend-Lines & Channels

How to Draw Downward Forex Trend Lines on Charts MT4 Trendline Indicator

A downward forex trend-line is plotted above the downward trend pattern formed by consecutive lower highs, the downwards forex trend-line must connect at-least 2 highs, with the most recent high being lower. For our forex downward trend examples we shall use the MT4 technical analysis software forex charts to illustrate example of downward forex trend.

Since forex trading price moves downward in a zigzag manner forex traders normally draw a downward forex trend-line which shows the general downward direction of the forex trading prices. In forex market technical analysis, this general forex trading price direction is referred to as the TREND by traders. In forex technical analysis definition we can define this forex down trend line is plotted on a Forex chart showing the resistance areas (bearish market direction).

A forex downtrend occurs when the price forms a series of lower highs & lower lows. Each price high is going to be lower than the previous high - lower high, and each low is lower than the previous low - lower low therefore showing bearish price movement.

Forex Downtrend lines gain more validity each time price touches the downwards forex trend line but doesn't penetrate the trend line. A forex downtrend remains the general direction until this series of lower highs and lower lows is broken.

In forex technical analysis, An up side penetration of a forex downtrend line is a technical buy signal, and usually the first indication that the bearish direction of forex trading prices may soon reverse.

Drawing a Downwards Forex Trendline - Downward Forex Trendline MT4 Trend Lines Indicator

When it comes to learning how to draw & learning forex technical analysis of forex charts, you need to know that when the forex market is bearish it forms lower lows & lower highs forming a downwards general market direction. These are the points that are used to draw the downward forex trend line.

To draw this downward trend setup we use resistances and to do it correctly two resistances are needed. When forex trading price touches this forex trend line, then we sell and place stop loss just a few pips above the sloping resistances:

Trading This Downward Forex Trend Market Move - How to Trade Downward Forex Trend Line

When trading with this forex trend line trading method, this forex trend line setup will show the general direction of the market as downward therefore forex traders will only open short sell forex trades. These are the levels where if price retraces then these points will provide strong resistance. This is why many short sellers will wait until price retraces upward and hits these retracements levels to open sell forex trades. Forex trades opened at these levels have a high Risk to Reward Ratio with minimum draw down.

For Example, in the above forex trading example, a trader would have opened short sell signals at the resistance1, resistance2, resistance3 and these sell forex trades would have made a lot of trading profits with minimum amount of drawdown/retracement.

How to Draw a Forex Downward Channel - Downward Channel MT4 Indicator

A forex downward channel is plotted by drawing a line that is parallel to the downward trendline & then adjusting it to touch the bottoms boundary of the forex trading price movement. This then forms a downward forex channel & as long as price stays between these 2 channels the general forex market direction is intact the market direction will continue being bearish.

Trading The Downward Forex Trading Channel

The downward forex channel is used by traders to show levels where it is best to take profits. Traders will take some profit once the price touches the lower channel & wait for another retracement before opening a short sell trade again.

MT4 Tools For Drawing Forex Channels - Downward Forex Channels MetaTrader 4 Channels Indicator

The forex tools to draw these forex channels studies on the MetaTrader 4 charts can be found on the Lines Toolbar within the MT4 platform, to access this MetaTrader 4 tool bar if it is not activated on your MT4 Trading Platform, Click in "View" Next to "File" at the top left corner of the MT4 Platform & click View, Then Click on Toolbars, Then Check the Lines Tool Bar by clicking on it.

Below is the screenshot of these MT4 tools: just click on this MetaTrader 4 channels drawing tool and select the point to where you want to place this forex channels tool on the forex chart.

MetaTrader 4 Technical Analysis Charts - Downward Forex Channels

MT4 Toolbar - MT4 Tools for Drawing Forex Trend Lines and Forex Channels used to obtain these trend line drawing tools is shown above, to draw these trend line setups or forex trading channels, just select the above MT4 trend line drawing tools shown on the MT4 software and select the two points where you want to draw the downward trend line.

This trend line trading strategy is one of the simplest and popular technical indicators used by traders to analyze the forex market trend direction.