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