Trend is your friend. Dance with the friend. Tune to the trend.
Descending Triangle is a chart pattern, characterized by horizontal bottom and sloping top. This is created when a bearish market pushes down against a support level.
When a falling market hits against a support, it bounces up and tries to break through the support, two or more number of times. As it does this it forms equal swing bottoms and lower low swing tops, which speaks about the bearishness of the market. When the swing tops and swing bottoms are joined with the trend lines, we get this characteristic pattern. Because of its strength, it finally breaks down the support level to give us a short trade
Study the charts given below.
This is a continuation pattern in a down trend.
This is a reversal pattern in an up trend.
How to trade?
Take trades at the break out of the trend lines, with the stop loss order placed above or below the pattern, or conservatively, it can be placed above or below the the breakout bar.
The target for this trade is a level equal to the height of the base of the triangle, from the break out point.
This pattern usually occurs in a down trend and thus is a continuation pattern. But rarely it can also occur in an up trend when the prices shoots above a resistance level, and then the supply increases more than the demand. Now it acts as a reversal pattern.
Occasionally the prices fails to fall below the support level that is at the horizontal base of the triangle and thus rallies up.
Compare this with ascending triangle, symmetrical triangle.
Click here to go back from Descending Triangle to Chart Patterns
.Click here to go back to Home