What Is a Descending Triangle?

A descending triangle is a chart pattern used in technical analysis created by drawing one 澳洲幸运5官方开奖结果体彩网:trend line connecting a series of lower highs and a second horizontal trend line connecting a series of low🌞s.

A regular descending triangle pattern is commonly considered a 澳洲幸运5官方开奖结果体彩网:bearish chart pattern or a continuation pattern with an established downtrend. However, a descending triangle pattern can also be bullish, with a breakout in th🔜e opposite direction, and is known as a🗹 reversal pattern.

What Does a Descending Triangle Tell You?

A popular chart pattern used by traders, descending triangles clearly show that demand for an asset, 澳洲幸运5官方开奖结果体彩网:derivative, or commodity is weakening. When the price breaks below the lower support, it indicate🌟s that downward momentum is likely to continue.

Technical traders have the opportunity to make substantial profits over a brief period. They often watch for a move below the lower support trend line, suggesting that downward momentum is building and a breakdown is imminent. Traders often enter into 澳洲幸运5官方开奖结果体彩网:short positions to further lower the asset's price.

How to Identify a Descending Triangle

The descending triangle is one of three triangle pattern🔯s used in technical analysis.

A descending trian🍸gle pattern has the following features:

• An existing downtrend before the descending triangle pattern appears.
• A descending upper trendline can be drawn by connecting the upper points and indicates that the sellers are pushing prices downward.
• The lower horizontal trendline acts as support as prices approach this level until the breakout occurs.
• The downward trend continues after the breakout and is evident below the lower trendline.

How to Trade a Descending Triangle

Traders often initiate a 澳洲幸运5官方开奖结果体彩网:short position following a high volume 澳洲幸运5官方开奖结果体彩网:breakdown fr🐷om lower trend line support in a descending triangleꦏ chart pattern.

In general, the price target for the chart pattern is equal to the entry price minus the vertical height between the two trend lines at the time of the breakdown. The upper trend line resistance also serves as a 澳洲幸运5官方开奖结果体彩网:stop-loss level for traders to limit th🎶eir potential losses.

Traders often choose the simplest way to use the descending triangle pattern and buy the breakout of the triangle, and it is one of several common strategies to take profits using this pattern.

Descending Triangle Pattern Breakout Strategy

This strategy anticipates a breakout from the descending triangle pattern an🦩d uses a combination of trading volumes and asserting the trend to capture short-term profits. When a stock is in a downtrend or a consolidation phase, traders watch for l𓂃ower highs and lower lows being formed.

Descending Triangles With Heikin-Ashi Charts

澳洲幸运5官方开奖结果体彩网:Heikin-Ashi charts can apply to any market and are a trading tool used in conjunction with technical analysis to assist in identifying trends. The Heikin Ashi 澳洲幸运5官方开奖结果体彩网:candlesticks turn bullish before the breakout. In this strategy, traders watch for the descending triangle pattern to form and wait for the bullish trend to begin using the Heikin Ashi charts. 

Descending Triangle With Moving Averages

Traders can combine price techniques, like the 澳洲幸运5官方开奖结果体彩网:moving average, and chart p𒐪atterns with technical indicators. In this strategy, traders use the descending triangle pattern to anticipate potential breakouts, and the moving average indicators trigger the signal to 𝄹initiate a trade.

Descending Triangle Reversal Pattern—Top

This pattern emerges when volume declines and new stock price highs are limited. The pattern indicates that the bullish phase is ending. The trading period begins when the descending triangle reversal pattern is revealed ahead of the breakout.

Descending Triangle Reversal Pattern—Bottom

The descending triangle reversal pattern at the bottom end of a downtrend is where the price action stalls and a horizontal support level mark a bottom. If the price action breaks to the upside from the descending triangle reversal pattern at the bottom, a trader can choose long positions.𓆏

Descending Triangles vs. Ascending Triangles

Both the ascending and descending triangle are 澳洲幸运5官方开奖结果体彩网:continuation patterns. The descending triangle has a horiz🎃ontal lower trend line and a descending upper trend line. The ascending triangle has a horizo🐎ntal trend line on the highs and a rising trend line on the lows.

Triangles reveal an opportunity to short and suggest a profit target, so both triangles are just different takes on a potential breakdown. Ascending triangles can also form at the reversal of a downtrend but are more commonly viewed as a bu🦩llish continuation pattern.

The Limitations of a Descending Triangle

Since no chart pattern is perfect and analysis is often subjective, using descending triangles has limitations. A false breakdown may occur, or trend lines may need to be redrawn if the price action breaks out in the opposite direction. If a breakdown doesn't occur, the stock could rebound to re-test the upper trend line resistance before making another move lower to re-test lower trend line 澳洲幸运5官方开奖结果体彩网:support levels. The more often that the price touches the support and 澳洲幸运5官方开奖结果体彩网:resistance levels, the more reliable the chart pattern.

The Bottom Line

The descending triangle is a chart pattern used in technical analysis. The pattern usually forms at the end of a downtrend but can also occur as a consolidation in an uptrend. A regular descending triangle pattern is commonly considered a bearish chart pattern with an established downtrend. A descending triangle pattern, however, may be bullish, with a breakout in the opposite direction, known as a reversal pattern.