MetaTrader 4 Tools for Drawing Gold Trendlines and Gold Channels
How to Draw Downward XAUUSD Trend Lines on XAUUSD Charts
A downwards gold trend-line is drawn above the downward trend pattern formed by consecutive lower highs, the downwards gold trend-line must connect at-least two highs, with the most recent high being lower. For our downward trend examples we shall use the MT4 technical analysis software gold charts to illustrate an example of downward xauusd trend.
Since xauusd price moves downward in a zigzag manner gold traders normally draw a downward gold trend-line which shows the general downward direction of the xauusd prices. In gold market technical analysis, this general xauusd price direction is referred to as the TREND by traders. In xauusd trading analysis definition we can define this down gold trend-line is drawn on a XAUUSD chart showing the resistance levels (bearish market direction).
A down gold trend occurs when the price forms series of lower highs and lower lows. Each price high is lower than the previous high - lower high, and each low is lower than the previous low - lower low therefore showing bearish xauusd price movement.
Gold Down trend lines gain more validity each time xauusd price touches the downward gold trend line but does not penetrate the trend-line. A down trend remains the general direction until this series of lower highs and lower lows is broken.
In gold trading analysis, An upside penetration of a down gold trend line is a technical buy signal, and usually the first indication that the bearish direction of xauusd prices may soon reverse.
Drawing a Downward XAUUSD Trend Line
When it comes to learning how to draw and learning xauusd trading analysis of gold charts, you need to know that when the xauusd market is bearish it forms lower lows & lower highs forming a downwards general market direction. These are the points that are used to plot the downward gold trend line.
To draw this downward trend setup we use resistances and to do it correctly two resistances are needed. When xauusd price touches this gold trend line, then we sell and place stop loss just a few pips above the sloping resistances:
How to Trade Downward XAUUSD Trend Line
When trading with this gold trend line trading method, this gold trend line setup will show the general direction of the market as downwards therefore gold traders will only open short sell xauusd trades. These are the levels where if xauusd price retraces then these points will provide strong resistance. This is why many short sellers will wait until xauusd price retraces upward & hits these retracements levels to open sell xauusd trades. Gold trades opened at these levels have a high Risk to Reward Ratio with minimum draw down.
For Example, in the above gold trading example, a trader would have opened short sell signals at the resistance1, resistance2, resistance3 and these sell xauusd trades would have made a lot of trading profits with minimum amount of drawdown/retracement.
Downwards XAUUSD Channel MT4 Channel Indicator
A gold downward channel is drawn by drawing a line that is parallel to the downwards gold trendline & then adjusting it to touch the bottoms boundary of the xauusd price movement. This then forms a downward gold channel and as long as price stays between these 2 channels the general gold market direction is intact the xauusd market direction will continue being bearish.
Trading the Downward XAUUSD Channel
The downward gold channel is used by traders to show levels where it is best to take profits. Traders will take some profit once the xauusd price touches the lower channel and wait for another retracement before opening a short sell gold trade again.
Downwards XAUUSD Channels MT4 Channels Indicator
The gold trading tools to draw these gold channels studies on the MT4 xauusd charts can be found on the Lines Toolbar within the MT4 platform, to access this MT4 tool bar if it is not activated on your MT4 Gold Trading Platform, Click in 'View' Next to 'File' at the top left corner of the MT4 XAUUSD Trading Software and click View, Then Click on Tool-bars, Then Check the Lines Toolbar by clicking on it.
Shown 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 gold channels tool on the xauusd chart.
MT4 Technical Analysis Charts - Downward XAUUSD Channels
MT4 Toolbar - MT4 Tools for Drawing Gold Trend Lines and XAUUSD Channels used to obtain these trend line drawing tools is shown above, to draw these trend line setups or gold channels, just select the above MT4 gold trend line drawing tools shown on the MT4 software and select the two points where you want to draw the downward trend line.
This gold trend line gold trading strategy is one of the simplest and popular gold indicators used by traders to analyze the xauusd market trend direction.
