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