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.
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
BREAKING DOWN '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.
-
Swing Low
Swing low is a term used in technical analysis that refers to ... -
Double Top
A double top is a chart pattern, characterized by two consecutive ... -
Trough
A trough is the stage of the economy's business cycle that marks ... -
Negative Directional Indicator ...
A component of the average directional index (ADX) that is used ... -
Descending Tops
A pattern in charts where each peak in price is lower then the ... -
Inverse Head And Shoulders
A chart pattern used in technical analysis to predict the reversal ...
-
TradingPeak-and-Trough Analysis
Prices never move in straight lines, so it's time to learn about this powerful trend-following technique. -
TradingThese Stocks Are Still Sell Candidates
Despite a recent rally, these stocks are still in downtrends and do not yet warrant buying. -
TradingFalling Stocks Still Giving Short Trade Signals
These stocks are in downtrends, and still flashing short trade signals. -
TradingBond ETFs Breaking Multi-year Trendlines (HYG, LQD)
Various segments of the bond market are selling off, and approaching pivotal levels on the long-term charts. -
TradingStocks With More Downside in the Short-Term
Downtrending stocks that potentially have more room to fall. -
Financial AdvisorDowntrending Stocks to Short or Sell
These stocks are trending lower and currently near a short sale areas, based on breaks lower and falling stock indexes. -
InvestingRules and Strategies For Profitable Short Selling
Short sales work well in bull and bear markets but strict entry and risk management rules are required to overcome the threat of short squeezes. -
TradingSpotting First Rise Patterns And What To Do With Them
The first rise pattern marks the first 100% retracement of a downtrend within the time frame of interest. -
InvestingWill Silver Recover in 2016? (SLV, GLD, JJC)
The end of the silver downtrend is likely to coincide with similar recoveries in gold, iron and copper. -
TradingWhen Not To Trade
When conditions arise where systems are likely to perform poorly, traders must exercise discipline and cease trading.
-
What is a common price target when identifying a double top?
Learn about a common bear trading strategy once a double top pattern is identified, and discover how conservative and aggressive ... Read Answer >> -
What are the key metrics used to measure the business cycle?
Learn what key metrics are used to determine if the business cycle is in a period of expansion, contraction, or at a peak ... Read Answer >>