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