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