Downtrend

Dictionary Says

Definition of 'Downtrend'

Describes the price movement of a financial asset when the overall direction is downward. A formal downtrend occurs when each successive peak and trough is lower than the ones found earlier in the trend.
 
Downtrend


Notice how each successive peak and trough is lower than the previous one. For example, the low at Point 3 is lower than the low at Point 1. The downtrend will be deemed broken once the price closes above the high at Point 4.

Downtrend is the opposite of uptrend
Investopedia Says

Investopedia explains 'Downtrend'

Many traders seek to avoid downtrends because they can drastically affect the value of any investment. A downtrend can last for minutes, days, weeks, months or even years so identifying a downtrend early is very important. Once a downtrend has been established (series of lower peaks) a trader should be very cautious about entering into any new long positions.

Related Definitions

  • Trend

    The general direction of a market or of the price of an asset. Trends can vary in length from short, to intermediate, to long term. If you can identify a trend, it can be highly ...
    Read More »
  • Average Directional Index - ADX

    An indicator used in technical analysis as an objective value for the strength of trend. ADX is non-directional so it will quantify a trend's strength regardless of whether it is up or ...
    Read More »
  • Trendline

    A line that is drawn over pivot highs or under pivot lows to show the prevailing direction of price. Trendlines are a visual representation of support and resistance in any time frame.
    Read More »
    • Trend Analysis

      An aspect of technical analysis that tries to predict the future movement of a stock based on past data. Trend analysis is based on the idea that what has happened in the past gives ...
      Read More »
    • Bear Market

      A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear ...
      Read More »
    • Long (or Long Position)

      1. The buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in value.2. In the context of options, the buying of an options ...
      Read More »
    • Uptrend

      Describes the price movement of a financial asset when the overall direction is upward. A formal uptrend is when each successive peak and trough is higher than the ones found earlier in ...
      Read More »
    • Sideways Trend

      Describes the horizontal price movement that occurs when the forces of supply and demand are nearly equal. A sideways trend is often regarded as a period of consolidation before the ...
      Read More »
    • Triple Bottom

      A pattern used in technical analysis to predict the reversal of a prolonged downtrend. The pattern is identified when the price of an asset creates three troughs at nearly the same price ...
      Read More »
    • Three Black Crows

      A bearish candlestick pattern that is used to predict the reversal of the current uptrend. This pattern consists of three consecutive long-bodied candlesticks that have closed lower than ...
      Read More »

Articles Of Interest

Partner Links