What is Descending Triangle Pattern and How to Work?

What is Descending Triangle Pattern and How to Work?  

Descending Triangle Pattern?  

A descending triangle is like a shape that forms on price charts. Imagine drawing a flat line along the bottom where prices keep bouncing off from the support level, and a sloping line on top (resistance level) where prices keep getting lower. That's your descending triangle pattern.  

Important  features of the Descending triangle pattern:  

1. A flat bottom (support level).  

2. A downward-sloping top (resistance level).  

3. Decreasing volume as the pattern forms.  

How do you identify a Descending triangle pattern?  

1. Look for at least two low points at about the same level - that's your support level.  

2. Find at least two high points that are getting lower - that's your resistance level.  

3. The pattern usually takes a few days to a few weeks to form.  

4. You'll often see less trading activity as the pattern generates.  

What is the Psychology behind the Pattern  

Understanding why this pattern forms can help you use it better:  

1. Buyers are trying to hold the price up at the support level.  

2. Sellers are getting more aggressive, pushing the highs lower each time.  

3. It's like a tug-of-war, with sellers slowly gaining the upper hand.  

How to trade with the Descending Triangle pattern?  

For Bearish Traders:  

1. Wait for the price to break below the support line.  

2. Place a sell order just below this breakout point.  

3. Set your stop loss just above the breakout point.  

4. Target a price move about the same as the height of the triangle.  

For Bullish Traders:  

1. Sometimes, prices can break out upwards.  

2. If this happens, you could place a buy order above the resistance level.  

3. Just be extra careful, as this is against the main market trend.  

Things to keep in Mind for further trade?  

1. Always use this pattern with other indicators like volume and RSI for confirmation.  

2. Be aware of false breakouts - they happen.  

3. Keep an eye on the overall market trend too.  

4. Practice spotting these patterns on historical charts before risking real money.  

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