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. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
  2. Triangle

    A technical analysis pattern created by drawing trendlines along ...
  3. Momentum

    The rate of acceleration of a security's price or volume. The ...
  4. Support (Support Level)

    The price level which, historically, a stock has had difficulty ...
  5. Trendline

    A line that is drawn over pivot highs or under pivot lows to ...
  6. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
Related Articles
  1. Trading Strategies

    What is the breakout target price of an descending triangle?

    Find out more about the most common method traders use to place their target price following a breakout from a descending triangle pattern.
  2. Trading Strategies

    What trading opportunities does a descending triangle offer?

    Learn about the trading opportunities that may be presented with a descending triangle chart pattern, including when traders enter or exit their positions.
  3. Trading Strategies

    How do traders identify descending triangle patterns?

    Learn how to identify a descending triangle pattern on a security or index's price chart, and discover why traders consider them to be bearish indicators.
  4. Trading Strategies

    Where do traders place orders when they identify descending triangles?

    Learn how to identify descending triangles and how traders use recognition of that chart pattern to place trades before the breakout from the pattern.
  5. Active Trading Fundamentals

    Triangles: A Short Study In Continuation Patterns

    Learn how to read these formations of horizontal trading patterns.
  6. Charts & Patterns

    Continuation Patterns: In-Depth Look At Triangles

    We take a closer look at ascending and descending triangles to help traders predict the ultimate breakout direction.
  7. Charts & Patterns

    Continuation Patterns: An Introduction

    Those random movements in the charts actually form patterns. Learn the basics of what these patterns are.
  8. Charts & Patterns

    Continuation Patterns - Part 2

    Take a closer look at triangles, which appear in ascending, descending and symmetrical forms.
  9. Technical Indicators

    What are the main advantages and disadvantages of using a Simple Moving Average (SMA)?

    Examine some of the potential advantages and disadvantages involved with the use of a simple moving average or an exponential moving average.
  10. Trading Strategies

    What are the best technical indicators that complement the Relative Vigor Index (RVI)?

    Discover some of the best technical indicators that traders and analysts can employ to supplement the use of the relative vigor index (RVI).

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center