What Is A Descending Triangle Pattern?

Descending triangle chart patterns

The opposing of the ascending triangle is the descending triangle.

The upper side of the falling triangle slopes downward as the price makes lower highs, with the bottom of the triangle typically being a flat level of support. This pattern may indicate that support is eroding and that a downward breakout is about to occur. You may have a selling opportunity given that these lower highs show the bears are becoming more powerful.

You will learn two trading strategies in this session that employ descending triangles.

The chart below shows what a descending triangle pattern looks like:

Descending Triangle Pattern

Trading a descending triangle: method one

The first way you can trade this pattern is to enter once the support level has been broken and the price starts to move to the downside. You can wait for a candle to close below the support level before looking to go short.

The stop loss is placed above the down sloping side of the triangle pattern and you can then measure the profit target by taking the height of the back of the descending triangle and extending that distance down from the breakout.

The chart below demonstrates where to place the entry (orange), stop loss (red) and take profit levels (green):

Descending Triangle Pattern
Collected from tradimo

Trading a descending triangle: method two

The second way to trade a descending triangle is to wait for the price to break below the lower support line, as in the first example and then look to place a sell order on the retest of the support level (broken support now becomes resistance).

The stop loss would go above the new resistance area and the profit target would remain the same as in the first example.

The chart below demonstrates the second way you can trade the descending triangle pattern. It shows the entry, stop loss and take profit levels:

Collected from tradimo
  • The entry is made once the price breaks through the support and comes back up to test the old support level as resistance. The price find resistance (although a little bit higher than the old support level) and the price starts to go back down.
  • The stop loss in placed above the resistance level at which the price reversed.
  • The profit target goes the same distance away as the back of the triangle, down from the entry.
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