Descending Triangle Forex
In this article
This complete trading guide will teach you how to trade the descending triangle forex pattern like a seasoned professional. In the technological world of trading, there are many different patterns to be aware of that will allow you to make more informed trading decisions.
Once you master the descending triangle chart pattern, you’ll understand what goes on behind the price action.
This simple chart pattern can be spotted on long-term charts and short-term charts. Whether you are a swing trader or a day trader, your trading style doesn’t matter. Anyone can use technical analysis to find business opportunities, which reduces the triangle.
What is meant by a descending triangle?
The descending triangle is a bear pattern of the graph used in the technical analysis. It is performed by drawing a trend line connecting a series of lower maxima and a second horizontal trend line connecting a series of minima.
Traders are usually looking to move below the bottom line of trend support, as this suggests that descending momentum is increasing and threatening to collapse.
If it collapses, traders will enter short positions and aggressively help push the asset’s price even lower.
How is it formed?
This pattern is formed with two lines. The first one is the support level, from where the price keeps rebounding. The second line is formed by joining the lower highs in the price movement, making it a descending (Downward sloping) line.
This complete formation appears to be like a triangle with a descending line, and hence, it’s called a Descending Triangle pattern. A minimum of two touch-points is needed to make the support and descending lines valid.
What can you tell with the descending triangle?
Descending triangles are an overall chart pattern among traders because it clearly shows that the demand for any asset, derivative, or commodity is weakening.
When the overall price breaks below the lower support, it is clear that downside momentum is likely to continue or become even more vital. Descending triangles allows technical traders to make substantial profits over a brief period.
These triangles can be formed as an inverted pattern of an upward trend, but they are often seen as continuing bearish patterns.
What are the essential characteristics of descending triangles?
Descending triangles consist of two trend lines – descending trend lines and horizontal trend lines. A quick way to show descending triangles without an actual image is to use “flat bottom, falling vertices.”
Falling triangles show investors and traders that sellers are more aggressive than buyers because the price remains lower.
This is a trendy chart pattern because it clearly shows that demand for an asset or commodity is weakening. The pattern completes itself when the price leaves the triangle in the direction of the general trend, usually under low support.
This suggests that the downward momentum in the area is likely to continue or intensify, causing a collapse in the environment.
If it collapses, technical traders will be able to aggressively push the price of assets even lower and generate significant profits in the short term.
Descending triangle pattern features
1. Time forms any trend.
The primary thing which you need to do is find the price direction. Will the price action go down or withdraw from the top? If so, how many red candles are there?
Any more than three red candles of the price going down, and you have a bearish trend. The descending triangle is most potent when traded in the trend. Remember, the trend is your only friend. Notice how a trade stock is trending, and don’t fight it!
2. Angled Topping Trendline
As the trade stock trends, price action will hit a level that can’t break further below. Then it hits a massive peak and pulls back from that level. This is a point of resistance – the price cannot be higher.
Fortunately, the price action will return to where it first bounced. So you want to see him return, but not higher than the last resistance point.
This makes the bottom high. You can then draw an angular trend line at the end of the lower elevations.
3. Horizontal trend line support
In this model, I have already mentioned that the price finds a low level after a downward trend and moves back.
As soon as the price action touches the lower level at least twice or more, it signals the area of support. You can now place the flat horizontal trend line at a lower level.
4. Fallen Volume
The number is king. So make sure you see the story being told to you in the issue. Falling volume can indicate that longs are taking profits. That can lead to failed breakouts to the upside.
A volume drop can also mean that shorts are waiting to see what longs will do. As a result, shorts may accumulate shares at each failed breakout.
How does the descending triangle pattern work?
The descending triangular pattern works in two ways: a continuation or an inverted pattern. Let’s discuss both below in detail:
1. Continuation pattern
If downward trend patterns are created during a downtrend, this will continue the trend.
This will provide a strong support zone that limits the price. The price wants to go down, but due to the intense level of support, the price continues to jump in the band to weaken this price level.
The price then breaks the support zone and continues its downward trend with an impulsive wave.
2. Reversal chart pattern
Creating this pattern at the peak of the uptrend will reverse the price trend. He tells traders that they want to lower the price.
A repeated reversal pattern indicates that the price weakens the level of support and starts a new bearish trend in the security price after breaking through the support zone.
Identify a valid distribution in the descending triangle pattern
A false breakout is the most common tool market makers use to stop the pursuit of loss. Therefore, it is not easy to do business in the real market. There are so many cows on the market. If you want to be a winner, you must follow unique techniques.
To prevent the descending triangle pattern from breaking incorrectly, look for a giant bear candle that will break through the support zone.
It would help if you prevented breakdowns in the support zone by using a Doji candlestick as a small candlestick. Doji didn’t show a breakthrough, but the song wants to create a phase of indecision.
What is the main difference between the descending and ascending triangle?
Ascending and descending triangles are patterns of continuity. The descending triangle has a horizontal lower trend line and offers a descending upper trend line. In contrast, the ascending triangle has a horizontal height trend line and an ascending trend line of minima.
Moreover, triangles show a significant opportunity to short and suggest a profit target, so they are simply different looks on a potential breakdown.
Ascending triangles can even form on a reversal to a downtrend, but they are more commonly applied as a bullish continuation pattern.
The limitations of using a descending triangle
The limitation of triangles is the potential for a false breakdown. Even when the trend lines will need to be redrawn as the price action breaks out in the opposite direction – no chart pattern is perfect.
If a breakdown doesn’t occur, the stock could rebound to retest the upper trend line resistance before moving lower to retest lower trend line support levels.
The more times the price touches the support and resistance levels, the more reliable the chart pattern is.
How can you identify a descending triangle?
The descending triangles have many remarkable features that traders and investors can use to identify them quickly. For example, stocks are often used in financial and foreign exchange markets.
- Downtrend: The relevant market must be in the current downtrend before a downward triangular pattern can be seen.
- Consolidation phase: A descending triangle appears as the market enters the consolidation phase. Lower upper trend line: Based on the second point, a descending trend line can be obtained by combining high points and showing that traders are slowly pulling prices down.
- Horizontal lower trend line: The lower horizontal trend line acts primarily as support, and prices reach a level until a breakthrough occurs.
- Continuous downtrend: This occurs after breaking below the bottom trend line.
Tips to follow when trading in a descending triangle pattern
- Subjectivity is essential when selling a descending triangle pattern. Traders waiting for the “classic” descending triangle pattern often find themselves on the sidelines. Knowledge and experience are the best way to do business, and this can only be achieved through practice.
- Note that the descending triangle pattern is also known as the measurement motion diagram pattern. The moving map measurement pattern is when you measure distance and the same project from a breakthrough.
- Many other trading strategies can be well combined with a descending triangle chart. For example, it fits nicely into the investor’s purchasing and retention strategy. The triangle pattern also works with technical analysis, complementing the fundamental analysis.
- In conclusion, the descending triangle pattern is a versatile chart pattern that often displays a stock’s distribution phase.
- Following a descending triangle pattern, the breakout is often swift and momentum-led. This can lead to solid results when familiar with the outlined trading strategies.
Advantages of the descending triangle pattern in forex
- Explosive downward prices move downwards tend to happen when this pattern forms, so it pays to know this chart pattern.
- The reward is suitable for this forex trading system.
Disadvantages of the descending triangle pattern in forex
- are that sometimes the breaking candle can be too high, which means that your distance from the stop loss in pips can be large
- Sometimes, instead of bouncing down, the price will shoot up, in which case you can switch to using a forex trading strategy to break the trend line.
Trading rules to follow in a descending triangle pattern
- Wait for the card to break and form a candlestick. The breakout card candlestick is a candlestick that performs a continuous downward movement that breaks the support level and must close below.
- Please place an order to stop the sale two pips below it. Then, place your stop loss (Sl) 5-10 pips over the breakout candle.
- You can use the previous swing lows chart for profit or calculate 1: 3 based on the risk-reward ratio (R:R).
Why is it profitable?
The descending triangle is one of the most popular chart patterns because it is easy to understand and clearly shows the demand for stocks when there is a shortage. If the trade price falls below the level of support, the shares are likely to continue to fall.
This bearish formula allows traders to achieve more than just short-term returns. These triangles may also indicate an inverted pattern or an upward trend, but they represent a bearish permanent pattern in most cases.
Frequently asked questions (FAQs)
1. Can the descending triangle be bullish?
Traditionally, a regularly descending triangular pattern is considered a bear pattern of a graph. However, the pattern of the descending triangle can also be substantial. In this instance, it is known as a reversal pattern. Therefore, the descending triangle can be viewed as a continuation or reversal pattern.
2. Do descending triangles break up or down?
The descending triangle is a bearish continuation pattern. This pattern forms two converging lines. The initial is a downward slope with resistance, and the second is horizontal support. There must be oscillations between the two lines to verify the descending triangle.
3. Is the descending triangle good?
And here is a short version of the triangle patterns: Ascending triangles are bull formations waiting for an ascending breakthrough. Descending triangles is a bearish formation waiting to break down. Is the descending wedge strong or bearish?
The falling wedge is a bull pattern. Together with the rise of a wedge formation, these two create an energetic pattern that offers a change in trend direction.
Sales involve risk and activity. Therefore, make sure you are familiar with the descending triangle pattern before putting any real money into this chart.
Use these simple tricks very vigorously when used in the proper context. Be sure to read our latest article on technical analysis strategies.
The descending triangle chart can be combined with your preferred trading strategy. Once you learn to recognise them and train your eyes to see them in real-time, it will help you better understand the price action.
Jason Morgan is an experienced forex analyst and writer with a deep understanding of the financial markets. With over 13+ years of industry experience, he has honed his skills in analyzing and forecasting currency movements, providing valuable insights to traders and investors.
Forex Content Writer | Market Analyst