How to Draw XAUUSD Trend Lines & Channels on Gold Charts
Sometimes support & resistances are formed diagonally in a similar way like a staircase. This forms a xauusd trend which is a sustained movement in one direction either upward or downward.
A xauusd trend line depicts the points of support & resistance for the gold trading price, depending on the direction of the market. For an upward moving xauusd market xauusd trend - trend line will shows the points of support and for a downward moving xauusd market xauusd trend - trend line will show the areas of resistance - xauusd trend lines are mainly used by many traders to determine these resistance and support levels on gold charts.
A XAUUSD 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 types of xauusd trend lines: upward xauusd trend line and downward xauusd trend line. XAUUSD trend line is an aspect of gold trading analysis that uses xauusd line studies to try and predict where the next gold 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 technical analysis is based upon the idea that xauusd markets move in trends. XAUUSD trend lines are used to show three things.
- The general direction of the market - up or down.
- The strength of the current xauusd trend - and
- Where future support & resistance will be likely located
If xauusd 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 xauusd trend-line is broken.
Drawing these trend-lines on a xauusd chart shows the general xauusd trend of the xauusd market which can either be upwards or downward.
Below is an example of how to draw these trend lines on gold charts
Course: How to Draw Upward XAUUSD Trend Line and Trade Upward XAUUSD Trend Move
Course: How to Draw Downward XAUUSD Trend-Line & Trade Downwards XAUUSD Trend Move
The MT4 software provides xauusd charting tools for drawing these trend lines on gold charts. To draw xauusd trend lines onto a xauusd chart, gold traders can use the xauusd tools provided on the MetaTrader 4 software that is shown below.
To draw xauusd trend-lines on a xauusd chart just click the XAUUSD MetaTrader 4 Draw XAUUSD Trend Line Tools as shown above on the MetaTrader 4 platform technical analysis software and select point A where you want to start plotting the trend-line and then point B where you want the trend line to touch. You can also right-click in trend-line & on the properties option select option to extend ray by checking the 'ray check box', if you do not want to extend the trendline, then uncheck this option in your MetaTrader 4 platform. You can also change other xauusd 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 xauusd trendline technical analysis with it.
The xauusd trend is your friend. Is a popular saying among traders because you should never go against it. This is the most reliable technique to trade XAUUSD Trading because once gold 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 gold market.
Principles of How to Draw Gold Trendlines
Use gold candle stick charts
- The points used to draw the trendline are along the lows of the gold trading price bars in a rising gold market. An upwards bullish xauusd trend move is defined by higher highs & higher lows.
- The points used to draw the trendline are along the highs of the gold price bars in a falling downward market. A downwards bearish xauusd trend move is defined by lower highs and lower lows.
- The points used to draw xauusd trend lines are extremes points - the high or the low gold trading price. These extremes are important because a close beyond the extreme tells investors the xauusd trend of xauusd might be changing. This is an entry or an exit signal.
- The more often a xauusd trend-line is hit but it is not broken, the more powerful its signal.
There are 2 main ways of trading this xauusd trend line technical analysis set-up:
- The XAUUSD Trend Line Bounce - XAUUSD Trend Line Bounce
- The XAUUSD Trend-Line Break - XAUUSD Trend Line Break
Technical Analysis Methods of Gold Trendlines
The xauusd trendline bounce is a continuation xauusd signal where gold trading price bounces off this xauusd trend line to continue moving in the same direction. In a downward xauusd trend, the xauusd market will bounce downwards after hitting this xauusd trend line level which is the resistance level. In an upward xauusd trend, the xauusd market will bounce upwards after hitting this xauusd trend line level which is the support level.
The xauusd trend-line break is a reversal signal where the xauusd market goes through the trend line & starts moving in the opposite direction. When a xauusd up trend is broken then the sentiment of the xauusd market reverses and becomes bearish and when a xauusd down trend is broken then the xauusd market sentiment reverses & becomes bullish.
For very strong xauusd trends, after this xauusd trend line break trading signal, the gold trading price will consolidate for some time before moving in the opposite direction. For short term xauusd trends then this xauusd trendline break xauusd signal will mean gold price may reverse direction immediately.
In xauusd, both the trend line bounce & the trendline break that are used in technical analysis charts are based upon these trend line levels being support & resistance levels.
Entry, Exit & Setting stops:
This xauusd 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 xauusd trend line bounce is a low-risk entry method used by traders to place entry trades after gold trading price has retraced. XAUUSD trades are setup along these trend line levels and a stop loss placed just above or below these trend lines.
The xauusd trend-line break is a crucial technical indicator of possible xauusd trend reversal. When the trend line is broken the gold trading price starts move in the opposite direction. This provides an early exit signal for gold traders to exit their open trades and take profits. When there a penetration of these trend line levels, it is a signal that the gold price can begin moving in the opposite direction.
Unlike other xauusd technical analysis indicators there is no formula used to calculate the trend line, this xauusd trend line formation is just drawn between two chart points on the gold chart.
