The descending triangle pattern is generally reliable, especially when confirmed by volume and other indicators. Traders can place stop losses just above the descending resistance line or the last swing high, minimising potential losses if the trade does not perform as expected. As a bearish continuation pattern, it often indicates that the prevailing downtrend is likely to persist. This aligns traders with the dominant market trend, increasing the chances of a successful trade.

  • The touchpoints define critical support and resistance levels, which traders use to gauge potential breakout points in Forex, stock, cryptocurrency and commodity.
  • The effectiveness of the descending triangle pattern can vary across different timeframes, with longer timeframes generally providing more reliable signals.
  • Descending triangles form in the intermediate (middle) part of a bearish price trend and these patterns indicate a continuation of a already-established bearish trend.
  • A descending triangle pattern indicates the price of a security is likely to continue to fall.
  • The converging trendlines, one flat and one descending create a triangular shape on the chart.

Ascending Triangle Pattern: A Bullish Stock Chart Pattern

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 how to trade descending triangle lower trend line support levels. The more often that the price touches the support and resistance levels, the more reliable the chart pattern.

In the attached example, the descending triangle breakout occurred while the price was already below the 50-day simple moving average. This positioning below the moving average highlights the bearish sentiment and reinforces the expectation of a downward continuation. The descending triangle pattern breakout strategy focuses on identifying and trading the breakout below the horizontal support line. The key is to wait for a confirmed breakout with strong volume, signalling the continuation of the downtrend. It’s important to remember that the descending triangle chart pattern is traditionally used to anticipate potential breakouts in the direction of the bearish trend.

Proper risk management techniques, including stop losses and position sizing, remain critical when acting on triangle breakdowns. Traders and intraday speculators can also mix price action strategies, chart patterns, and technical indicators. One of the most traditional and straightforward technical indicators to use is the moving average. Traders recognize the price is in a downtrend, draw the lower horizontal line after at least two unsuccessful attempts to break the support level.

Descending Triangle Entry and Exit Points

It involves an anticipation of a breakout from the descending triangle pattern. This strategy uses a very simple combination of trading volumes and asserting the trend, which can be used to capture short term profits. Technicians can start by examining the structure of the pattern itself. The descending triangle forms through a flat support line along the bottom and a descending resistance line converging downwards. This shape reflects decreasing bullish momentum that may lead to an eventual bearish breakdown.

Descending Triangle Price Target

The main difference between these two patterns is the directional bias. The descending triangle pattern typically signals a bearish breakout, while the symmetrical triangle is neutral, with breakouts possible in either direction depending on market conditions. When the price remains consistently below the 50-day moving average during the formation of the descending triangle pattern, it indicates sustained selling pressure. The subsequent breakout below the horizontal support line further confirms that the downward trend continues.

Descending Triangle Trading Rules

However, the descending triangle reversal pattern can potentially reward you with bigger profits if traded in the right context. We only trade the descending triangle reversal pattern when this price formation develops at the end of a bullish trend, and in the context of an uptrend. This simple chart pattern can be spotted on long-term charts and short-term charts.

You can typically observe that volume begins to diminish toward the end of the descending triangle pattern formation. The classic version of this pattern forms with a trend line that is sloping and a flat or a horizontal support line. The pattern emerges as price bounces off the support level at least twice. The completion of the pattern occurs after the end of a retracement in a downtrend. Both are potential reversal patterns if they form after a trend in the opposite direction. Use the previous trend context to determine if the descending symmetrical triangle is setting up for continuation or reversal.

  • A market analyst and member of the Research Team for the Arab region at XS.com, with diplomas in business management and market economics.
  • The horizontal support line offers a clear level for a breakout entry, while the descending resistance line helps identify stop-loss levels.
  • The descending triangle often forms within an existing uptrend in a bull market.
  • As previously mentioned, the formation requires at least two highs and two lows.

Thus, my preferred method is to use a sell stop order and enter the trade when the price just breaks below Support. Because as the price drops lower, there’s still a lack of buying pressure. Instead, sellers are willing to sell at even lower prices (that’s why you get a series of lower highs).

Triangle Patterns: Meaning, Types, and How to Trade

It is not advisable for traders to enter a trade before the price breaks through the support level with sufficient conviction. After the first hour and a half of the market open, HUSA formed a descending triangle. The pattern forms with a series of lower highs that come to a point at the $3 support level. Once the stock price breaks below the horizontal support line, project the measured distance downward from the breakout point. Descending triangles occur within a downtrend, signaling a potential continuation of the existing bearish trend. Conversely, ascending triangles occur within an uptrend, signaling a potential continuation of the existing bullish trend.

Descending triangles are a bearish pattern that anticipates a downward trend breakout. A breakout occurs when the price of an asset moves above a resistance area, or below a support area. The descending triangle has a historical breakout accuracy of around 54%–60% in the bearish direction. The pattern is more reliable when supported by strong volume and confirmed by additional technical indicators. The repeated tests of the support level reflect buyers’ attempts to hold ground, while the series of lower highs highlights increasing pressure from sellers.

Descending Triangle Pattern – Best Reversal Triangle (

Daily charts are commonly used, though the pattern can be effective across various timeframes from minutes to months. Get access to our AI trading signals for stocks, forex, crypto, and commodities. Join AI Signals today and unlock AI-powered trading tools designed to help you navigate the markets with confidence. One of the most important things we’ve learned at Chart Champions is not to take every triangle breakout at face value, especially in crypto and altcoins, where fake-outs are very common. There will be times when the market doesn’t re-test the breakout point.