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What is the “Descending Triangle” Price Pattern?

January 10, 2023 |
　　　

The Descending Triangle pattern, and how to use it

The descending triangle is a bearish chart pattern that is formed by a horizontal support level and a downward sloping resistance level. This pattern is created when the price of an asset is supported by a horizontal support level, but the resistance level is steadily decreasing. The descending triangle is a continuation pattern, which means that it is typically seen as a bearish sign and indicates that the asset’s price is likely to continue falling.

To form a descending triangle, the asset’s price will typically make a series of lower highs and test the support level several times before breaking through. Once the price breaks through the support level, it is likely to continue falling, as traders will likely enter into short positions and push the price lower.

One of the key characteristics of the descending triangle is that the trading volume tends to decrease as the pattern progresses. This is because the horizontal support level acts as a barrier, preventing the price from breaking through and causing traders to become less active. However, once the price does break through the support level, trading volume tends to increase as traders enter into short positions and push the price lower.

In order to trade the descending triangle pattern, traders should look for the following characteristics:

  1. A horizontal support level: This is a level at which the asset’s price has consistently found support in the past.
  2. A downward sloping resistance level: This is a trendline that connects the series of lower highs.
  3. Decreasing trading volume: As the pattern progresses and the price continues to test the support level, trading volume should decrease.
  4. A breakout: Once the price breaks through the support level, traders should enter into short positions and expect the price to continue falling.

http://monetamark1stg.wpenginepowered.com/wp-content/uploads/2022/12/descending-triangle.png


It is important to note that the descending triangle is a bearish pattern, but it is not a guarantee that the asset’s price will fall. As with any trading strategy, it is important to use risk management techniques and to always be aware of the potential for losses.

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