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