A Comprehensive Guide to Descending Triangle.

22. Dez. 2022

AMBUJACEM

A reliable bearish trend continuation pattern is known as Descending Triangle.

This post will cover these questions:
1. What is Descending pattern?
2. How to identify Descending Triangle?
3. Pre-requisite of pattern formation.
4. Trading Tactics.

1.What is Descending pattern?

#The descending triangle is a bearish formation that usually forms a continuation pattern during a downtrend.
#Descending triangles also sometimes function as reversal patterns at the end of an up trend, but typically they
are continuation patterns.
#Descending triangles are bearish in nature.

The descending triangle pattern here indicates that the buyers are not as aggressive as the sellers, so the price continues to generate lower highs. This shows that the demand for related security is falling.


2. How to identify Descending Triangle?

(a.) Drawing trendlines.
The bottom horizontal line (support line) is formed by two or more almost equal price lows, while the descending
trend line (resistance line) is formed by two or more declining highs.


(b.) what are Base and apex?

-The base is the vertical line drawn from the flat support trendline to the starting point (Resistance line) of the descending trend.
-The point at which both converging lines meet is called the apex point.
-The breakout should happen around 2/3 size of the whole pattern.

3. Pre-requisite of pattern formation.

(a.) Existence of prior trend.


It is very important to identify the previous trend, an established prior trend should
exist cause it's a continuation pattern. look for the pattern in a downtrend with a forecast of breakdown
from the horizontal line.

(b.)Volume pattern

While the pattern is forming the volume diminishes.
volume declines as the pattern develop and the price swings back and forth between an increasingly narrow range of
lower highs and similar lows.
However, there is a noticeable expansion in volume when the downside break occurs.

(c.) Retracement Moves.

The chances of a retracement move are very less in this pattern.
After the breakout the price can move again towards the breakdown zone to test the validity of the breakout,
on breakout the support is broken and when the price retraces the support becomes resistance and the price start moving
in the breakout direction.

4. Trading Tactics.
The entry will be below the support level and use protective stop loss above important resistance level,
or it can be above 50% of pattern range.
Minimum Take profit is the projected Base Line.

Use position sizing according to your stoploss level.

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Keep learning,
Happy trading.

Thankyou.