All About Descending Triangle Pattern

Candlestick patterns are an important tool for technical analysis. This trading school believes that history repeats itself in the stock market, which is why they look for trends in securities prices. Candlesticks are rectangle bars that indicate the closing and opening prices of securities during a trading session. They turn light green when the closing prices are higher than the opening. When the closing price falls below the opening price, they turn dark red. You may see lines at one end to indicate the trading period's high and lows.

What is the descending triangular pattern?

A descending triangle, also known as a bearish candlestick pattern, foretells that a certain security's price will move down in the future. It is visible when it passes through two lines: one connecting a series lower highs and a second horizontal trendline that connects a series lows.

Because of its shape, it is sometimes called the right-angle triangular. The descending triangle chart pattern indicates that sell-side traders have become more aggressive and will take over the price momentum of security.

Traders wait for a break in the trend's lower support and then take short position, ultimately pushing the security's price lower.

This candlestick pattern is very popular among traders because it signals that there is less demand for security on the capital markets. A trader can make significant gains quickly with the descending triangle.

Anatomy a descending triangular pattern

1. The price momentum should shift downward before the descending triangle. Investors shouldn't withdraw or pour money when the pattern appears.

2. This happens when the price trend is not continuing or reversing. When the market is in a consolidation phase regarding an asset

3. The descending triangle chart pattern's flat lower trend line should have at least two lows. While they don't need to be exactly the same, it is important that they are reasonably close. The time difference between the two lows should not be too large during trading.

4. To form the descending upper trendsline, there should be at most two highs between the lows. This descending triangle signifies that the market is currently in a consolidation phase, where traders will be bearish about the asset's price. To reach the descending trendline, the highs should fall successively.

5. This is when the descending triangle breaks down. Investors look for a continuation in the downtrend, which will confirm the descending triangle.

6. It is not to be confused with the ascending triangular, which has a horizontal trendline connecting the highs and an ascending line joining the lowers

How do you trade a descending triangular pattern?

Investors wait for the breakdown before they take a short position in an asset once the descending triangle pattern pattern has been confirmed. A simple method can be used to determine the price target to gain. It is usually calculated by subtracting from the entry price the distance between the lower and upper trendlines at the point where there has been a breakdown.

Conclusion

Although it can appear in an uptrend reversal, the most common use of the descending pattern is as a bearish continuation. This pattern offers advantages like ease of trading and a clearly defined price target. The triangle pattern is an intermediate-term candlestick pattern that traders can trade.

It has two main cons. First, it is not the most reliable pattern. Second, false breakdowns can occur which are then followed by quick price recovery. This could cause traders to lose money and reduce their chances of making profits. There is a possibility that the price for security could move sideways over a prolonged period of time, or even higher. It could indicate a strong descending trend if there is no break but the upper and bottom trend lines keep being touched repeatedly.