Descending Triangle Chart Pattern With Examples

You can see how the projected triangle depth measurement becomes a very accurate profit target. We have a basic stock trading course, swing trading course, 2 day trading courses, 2 options courses, 2 candlesticks courses, and broker courses to help you get started. We realize that everyone was once a new trader and needs help along the way on their trading journey and that’s what we’re here for. Each day we have several live streamers showing you the ropes, and talking the community though the action. If you do not agree with any term of provision of our Terms and Conditions, you should not use our Site, Services, Content or Information. Please be advised that your continued use of the Site, Services, Content, or Information provided shall indicate your consent and agreement to our Terms and Conditions.

The Descending Triangle chart pattern is one of the most important and popular chart patterns because it’s simple to understand and exhibits the demand for, or lack thereof in, the stock. Traders generate above-average returns in a short amount of time using this bearish pattern. The pattern serves as confirmation for a trading strategy or as a signal for traders to enter or exit a trade. The pattern can serve as confirmation for a trading strategy or as a signal for traders to initiate or leave a deal.

Triangles are known as continuation patterns, meaning the trend stalls out to gather steam before the next breakout or breakdown.
Just like feeling squeezed into that mountain valley, the descending triangle on a stock chart shows a downtrend being compressed between two converging lines.
It is considered a reliable pattern as it has an accuracy of 79% in predicting a downtrend with an average price decline of 16%.
If a breakdown doesn’t occur, the stock could rebound to re-test the upper trend line resistance before making another move lower to re-test lower trend line support levels.

#1 – Symmetrical Triangle

However, if the descending triangle occurs after a downtrend, it may mark a bearish-to-bullish trend reversal, but it’s in the middle of a downtrend, trend continues downward is more likely.
A descending triangle is a popular continuation pattern that emerges in a downtrend, just as an ascending triangle frequently forms in an overall uptrend.
A descending triangle pattern trading strategy is to scan the U.S. equities market for stocks trending -10% or lower.
Conversely, ascending triangles occur within an uptrend, signaling a potential continuation of the existing bullish trend.

That means you can use TradeStation for your broker and make trades directly from a TradingView chart. Filippo Ucchino has developed a quasi-scientific approach to analyzing brokers, their services, offers, trading apps and platforms. He is an expert in Compliance and Security Policies for consumer protection in this sector. Filippo’s goal with InvestinGoal is to bring clarity to the world of providers and financial product offerings.

#2 – Trading The Ascending Triangle Pattern

Such a chart pattern can indicate a trend reversal or the continuation of a trend. Rohan Malhotra is an avid trader and technical analysis enthusiast who’s passionate about decoding market movements through charts and indicators. Armed with years of hands-on trading experience, he specializes in spotting intraday opportunities, reading candlestick patterns, and identifying breakout setups. Rohan’s writing style bridges the gap between complex technical data and actionable insights, making it easy for readers to apply his strategies to their own trading journey. When he’s not dissecting price trends, Rohan enjoys exploring innovative ways to balance short-term profits with long-term portfolio growth.

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Once you identify the lower trade volume, you must measure the distance from the first high to the low. Then, project the same from the breakout area, which becomes your target price. Understanding these 5 components helps traders identify the descending triangle in all global markets. Following this, price breaks down below the support with strong momentum. As you can see, the minimum measure distance is nothing but the project from the initial high.

Our strategic partnerships with trusted companies support our mission to empower self-directed investors while sustaining our business operations. Traders often use this pattern to anticipate short-selling opportunities or to set stop-loss and take-profit levels. However, it’s essential to combine it with other indicators or analysis techniques for better accuracy. Descending triangles are used for technical analysis of financial markets and not fundamental analysis. When drawing a descending triangle, a minimum of two swing high peaks for the resistance line and two swing low troughs for the support line are needed to successfully complete the drawing. In the following example, we use a 60-minute stock chart for General Motors (GM).

Chart patterns are used specifically by traders and investors to find significant patterns in the prices of publicly traded assets such as stocks or bonds. This pattern, seen as a bearish continuation pattern, shows that sellers are attempting to drive prices below the support level. The market’s attempt to recover from the support lines indicates that buyers are trying to gain control and push the prices up. The pattern indicates that selling pressure will intensify after the price breaches the horizontal support line in a downward direction.

Once the price fails, the support level traders would enter a short position and use angular resistance as a stop level. The descending triangle is most commonly played as a bearish strategy because of its common occurrence in a bear market. Traders can wait for the price to reach support, then initiate short positions on the break below the triangle.

Descending Triangle Pattern Breakout Strategy

The maximum distance between support and resistance at the beginning of the formation of a triangle pattern establishes the minimum target of the trade. Supports and resistances of a triangle pattern serve as levels for setting stop losses. Traders interpret the descending triangle pattern as a sign of weakening bullish momentum. Additionally, a potential breakdown below the support level signals a bearish breakout, prompting them to sell or take short positions.

However, they can also be reversal patterns if they form after a prolonged downtrend. Like all technical analysis patterns, this pattern is not fool-proof, and there is no guarantee that it will lead to a profitable trade. Therefore, traders should always use the pattern with other analysis and risk management measures to make informed trading decisions. When the pattern’s breakout occurs, it’s usually indicative of a bearish move. The breakout’s direction and price projection, determined by the widest distance of the pattern subtracted from the resistance breakout, can serve as a crucial guideline.

Final Word: Descending Triangle Chart Pattern

The support trend line continues to close the channel until the resistance price level breaks on heavy volume to resume the prior trend again. Often a bullish chart pattern, the ascending triangle pattern in an uptrend is not only easy to recognize but is also a slam-dunk as an entry or exit signal. It should be noted that a recognized trend should be in place for the triangle to be considered a continuation pattern. In the above image, you can see that an uptrend is in place, and the demand line, or lower trendline, is drawn to touch the base of the descending triangle stock rising lows. These highs do not have to reach the same price point but should be close to each other.

The direction of the stock price movement after the triangle breaks out is critical. The descending triangle pattern is considered complete when the price breaks below the horizontal support line. A rise in volume accompanies this breakout and triggers bearish momentum. A recent real-world example of a descending triangle pattern can be seen in the price chart of Bitcoin (BTC) from June to July 2021. During this time, BTC’s price formed a descending triangle pattern, with the horizontal support level at around $30,000 and the descending resistance level at about $40,000. A regular descending triangle pattern is a continuation pattern that is generally considered as a bearish chart pattern with an established downtrend.