Descending Triangle

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

BREAKING DOWN '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.

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RELATED FAQS
  1. 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 ... Read Answer >>
  2. 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 ... Read Answer >>
  3. 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 ... Read Answer >>
  4. What is the breakout target price of an descending triangle?

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  5. How are descending tops interpreted by traders and technical analysts?

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