What is a Descending Triangle?

Descending Triangle Definition. A Descending Triangle is one of many patterns, familiar to forex traders, that suggest that a downward movement in pricing behavior is imminent. They are the exact opposite of Ascending Triangles. This type of formation occurs when a support floor forms beneath a slope of lower highs (see chart below). Selling pressure cannot seem to break through this support level. However, continuing lower highs suggest that selling pressure is building. In the chart, it is evident that sellers are starting to gain strength because they are causing lower highs. Pressure on that support level builds to the point that a breakdown is bound to occur. A wise forex trader will prepare in advance when he observes a condition forming like this, and may place bets on both directions. He may set an entry order just above the resistance line, as well as below. The tendency is for an downward move to take place, but either movement can happen. Pursuing a currency option strategy is another way to go also. In either case, the trader can win from anticipating, planning ahead, and then executing effectively to capture the gains the market offers.

Descending Triangle

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.