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