Descending Triangle Pattern: Best Reversal Triangle 2023

Over time, your ability to discern where the line should be placed will improve through repetition. Fortunately, regardless of the direction the formation implies, profitable trades can be produced using this charting technique. IU offers 3 trading courses with a track record of transforming brand-new traders into full-time trading professionals. So, to make things simple, we will walk you through 5 easy steps for identifying the pattern.

  • This would imply momentum is likely to continue driving the share price higher.
  • Traders use the descending triangle chart pattern to help capture shorting opportunities.
  • Therefore, understanding the chart formations and indicators is essential to creating a successful trading strategy.
  • All patterns, including the descending triangle, can happen in many different time frames.

Viktor loves to experiment with building data analysis and backtesting models in R. His expertise covers all corners of the financial industry, having worked as a consultant to big financial institutions, FinTech companies, and rising blockchain startups. In the chart above, you can see that the buyers are starting to gain strength because they are making higher lows. If you had placed another entry order below the slope of the higher lows, then you would cancel it as soon as the first order was hit. In this example, if we placed an entry order above the slope of the lower highs, we would’ve been taken along for a nice ride up. If this were a battle between the buyers and sellers, then this would be a draw.

However, regardless of where it emerges, a descending triangle acts as a bearish pattern that signals distribution. Prudent technicians combine descending triangle signals with other indicators like oscillators to gauge momentum trends. Candlestick analysis also helps assess seller pressure building up within the formation. Proper risk management techniques, including stop losses and position sizing, remain critical when acting on triangle breakdowns. Breakdown confirmation remains essential for descending triangles to signal reversals. The pattern is only considered validated when the price successfully penetrates support with an expansion of volume.

Is Descending Triangle Pattern Profitable?

This means the lower orders will only trigger if the break develops and pushes below the entry position at 101. If there’s a strong retracement back up, there’s a good chance that not all of the orders will trigger. Therefore unless there’s some fundamental reason to hold the position, we cut losses if the bearish break doesn’t happen quickly. The overall profit target is set around the depth of the pattern. For example suppose the distance from the highest to lowest point is 200 pips. Panning out to a bigger scale allows you to check for support and resistance areas beneath and above.

For example if the structure takes 8 days to complete, then that means waiting no more than 2 days for the breakout. The structure itself should not be the entire trend or a large section of it. The figure above demonstrates how to project a potential take-profit level by transferring the distance from A to B lower down, from C to D. Volume should diminish and dry up as the pattern matures towards the apex. Declining volume points to waning enthusiasm from buyers as the price range tightens.

On the final upward price move in the pattern that forms the next point on the downwardly sloping upper line, bitcoin’s price is $7300. Traders tend to use a downside breakout from a descending triangle pattern as good reason to hit the sell button. It is noteworthy that a bullish ascending triangle began to emerge for the instrument more globally, the breakout of which upward would mean a final price reversal. Knowing the criteria for building a descending triangle pattern, you can create a step-by-step guide to trading this chart formation. The first method is more aggressive and places an entry point just below the support. Once the horizontal line is broken, the trade opens with a stop loss placed above the support – which now acts as resistance.

  • Patterns develop because of traders’ mindset and emotional states.
  • Traders generally enter a position on a security when its price breaks above or below the boundaries of an ascending triangle.
  • Another technique that’s used by quite some traders is to not act on the initial breakout, but wait for the market to return to the breakout level.
  • Moving averages are one of the oldest and simplest of technical indicators.
  • Panning out to a bigger scale allows you to check for support and resistance areas beneath and above.

The descending triangle chart pattern enables traders to calculate the distance from the pattern’s highest point, which serves as its starting point, to the flat support line. This kind of technical analysis recognises a downward trend that eventually overcomes the resistance levels, causing the price action to fall. Usually, buyers push the prices higher when there is a price drop. The descending triangle, on the contrary, shows when there isn’t much buying pressure.

In this video, our trading analysts explain how to identify and trade the descending triangle pattern. Subjectivity is essential when trading the descending triangle pattern. Traders who wait for the “classic” descending triangle pattern will often find themselves on the sidelines. This descending triangle strategy with Heikin Ashi charts is effective to trade in the short term. Once you identify the lower volume, simply measure the distance from the first high and low.

Descending Triangles and How to Trade Them

It can also give traders a little time to rest as they watch how the price action will play out. In this example, APM formed a descending triangle from the market open. APM broke support and continued downward until consolidating from 10 a.m. Shorts could take a position at each failed breakout for the ride back to support. Longs could buy at support for the run-up and break of resistance.

Conclusion – Descending Triangle Chart Pattern

The descending triangle reversal topping pattern, and descending triangle reversal pattern at the bottom. Hello fellas, Here it is I represent to you my view about Ripple. Based on the technical analysis, I found an important pattern which forms a descending type of the triangle. But, once again I remind you that even the descending triangle which usually indicate a bearish pressure, it has a potential to make it a failure too.

Symmetrical Triangle

Short sellers love to see this pattern as it can signal a potential to profit when the price drops. A breakout is when a stock’s price moves out of the established triangle pattern. Breaking out implies pressure has been generated that could indicate the price will continue to persist in the same direction as the breakout. Typically, traders that leverage this tool monitor the stock’s price, waiting for a breakout.

Traders generally follow 4 major steps to trade with a Descending Triangle chart pattern in the stock market. Traders consider opening a long or short position once the falling triangle pattern is verified, depending on the direction of the price movement. The pattern is typically interpreted as an indication of a potential market reversal and trend change if it occurs during a long-term uptrend.

Once the breakout from the triangle occurs, traders tend to aggressively buy or sell the asset depending on which direction the price broke out. First, expect until the price breaks out the triangle downside and a possible test. Next, you enter a short trade and set a stop loss around the most recent high within the pattern. The take profit is determined by the height of the descending triangle, the distance between the highest price and the support level. Often, the descending triangle pattern occurs at a high in a bullish trend. In this context, the triangle serves as a reversal pattern that warns traders that the trend will soon change to bearish.

How Do You Trade the Descending Triangle Pattern?

Mean Reversion Definition Reversion to the mean, or «mean reversion,» is just another way of describing a move in stock prices back to an average. One of the main characteristics unique to Heikin Ashi charts is the fact that they can depict the trend easily. You can resolve this confusion by switching to Heikin Ashi charts. The illustration below shows what an “ideal” descending triangle pattern looks like, which is often labeled a descending wedge, as well. The downside breakout from the support triggers a strong bearish momentum-led decline. You can see how the projected triangle depth measurement becomes a very accurate profit target.


A descending triangle at the bottom indicates the possibility of opening long positions and the asset likely reaching the low, below which won’t go. In the above chart of the Dow Jones index, a descending how to trade descending triangle triangle pattern has formed, the price exiting from which went up. Sometimes, although less often than at the top or middle of a downtrend, the pattern can also be found at the bottom.