Descending Triangle

AAA

DEFINITION of 'Descending Triangle'

A bearish chart pattern used in technical analysis that is created by drawing one trendline that connects a series of lower highs and a second trendline that has historically proven to be a strong level of support. Traders watch for a move below support, as it suggests that downward momentum is building. Once the breakdown occurs, traders enter into short positions and aggressively push the price of the asset lower. The chart below is an example of a descending triangle:

Descending Triangle

INVESTOPEDIA EXPLAINS 'Descending Triangle'

This is a very popular tool among traders because it clearly shows that the demand for an asset is weakening, and when the price breaks below the lower support, it is a clear indication that downside momentum is likely to continue or become stronger. Descending triangles give technical traders the opportunity to make substantial profits over a brief period of time. The most common price targets are generally set to equal the entry price minus the vertical height between the two trendlines.

A descending triangle is the bearish counterpart of an ascending triangle.

RELATED TERMS
  1. Bear

    An investor who believes that a particular security or market ...
  2. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  3. Triangle

    A technical analysis pattern created by drawing trendlines along ...
  4. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
  5. Support (Support Level)

    The price level which, historically, a stock has had difficulty ...
  6. Momentum

    The rate of acceleration of a security's price or volume. The ...
Related Articles
  1. Triangles: A Short Study In Continuation ...
    Active Trading Fundamentals

    Triangles: A Short Study In Continuation ...

  2. Continuation Patterns: In-Depth Look ...
    Charts & Patterns

    Continuation Patterns: In-Depth Look ...

  3. Continuation Patterns: An Introduction
    Charts & Patterns

    Continuation Patterns: An Introduction

  4. Continuation Patterns - Part 2
    Charts & Patterns

    Continuation Patterns - Part 2

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center