How to Trade a Downtrend
Down Indices trend is when the stock indices price of a stock indices chart is moving lower & lower. Indices trading prices generally close lower than where they opened.
How to Trade Downwards Indices Trend: Indices traders use the downwards indices trend direction to open sell indices trades
Drawing a Downward Stock Indices Trendline
When it comes to learning how to draw a downward indices trend line, you need to know that when the stock indices trading market is bearish it forms lower lows & lower highs forming a downwards general indices trend direction - downwards indices trend. These are the points that are used to draw a downward indices trend line.
To draw downwards indices trend setup we use resistance levels and to do it correctly two resistance areas are needed. When stock indices price touches this downward trend line, then we open sell stock indices trades & place stop loss just a few pips above the sloping resistances:
How to Trade a Downtrend? - Strategy for Trading a Indices Downward Trend
Trading This Down Indices Trend Market Move
When trading with this down indices trend method, this downward trend setup will show the general direction of the market as downwards therefore indices traders will only open short sell stock indices trades. These resistance levels are the levels where if stock indices price retraces then these points will provide strong resistance. This is why many indices sellers will wait until stock indices price retraces upward and hits these retracements levels to open sell stock indices trades. Trades opened at these levels have a high Reward to Risk Ratio and have little drawdown.
For Example, in the above downwards indices trend example, a trader would have opened short sell signals at the resistance 1, resistance 2, resistance 3 and these sell stock indices trades would have been opened with minimum amount of draw-down/retracement.
How to Draw a Downwards Indices Channel
A downwards indices channel is plotted by plotting a line that is parallel to the downwards indices trendline & then adjusting it to touch the bottom boundary of the stock indices price movement. This then forms a channel & as long as the stock indices price stays between these 2 channels the general market down indices trend direction is intact the stock indices trading market direction will continue being bearish.
How to Draw a Downward Indices Channel - Downward Indices Trend Trading Strategy
Trading the Downwards Indices Channel
The downward indices channel is used by stock indices traders to show levels where it best to take profits. Traders will take some profit once the stock indices price touches the lower channel or the lower channel and wait for another retracement before opening a short sell indices trading again.
