Descending Triangle

A descending triangle is a bearish pattern which is formed by a horizontal line (acting as price support) and a diagonal line (acting as price resistance) that slopes downwards to meet the horizontal line. The price of the asset bounces between the trend lines that form the boundaries of the descending triangle, with the price highs progressively get lower until the price action experiences a downside breakout through the lower trend line.

The reason for the formation of the descending triangle is that buyers of the currency asset are gradually leaving the market, forcing the prices that form the resistance/upside barrier to gradually ease lower until such a time that buyers completely leave the market and sellers take over, causing the price to break through the horizontal support.

Descending Triangle

The lines that form the boundaries of the descending triangle must touch at least two areas where candles form highs and lows in order to be valid.

In order to trade the descending triangle, traders are expected to catch the downside breakout by using a Sell Stop order placed a few pips below the horizontal support.