Descending Triangle (Dsc Tri)

The Descending Triangle pattern is easily recognizable and often traded as a bearish continuation pattern by many traders. It is characterized by a bottom level of support that the price attempts to break through while simultaneously making a series of lower highs into that support level.

While within the pattern, the price typically has at least five swings and can break the trend in either direction. However, downside breaks generally have a higher probability of success as the lower highs into the horizontal level of support can be viewed as a build-up of bearish pressure, often leading to a break when the pattern is approximately 60% complete.

Aggressive traders may enter at the third touch of the falling trend line, with the stop above the second trend line touch. Conservative traders, on the other hand, may enter at the BCR (Break, Close, and Retest) of the horizontal support, with a stop above the support, now the resistance level/market structure.

Although trading these patterns as breakouts can be a higher-risk entry, many traders are successful with this trading style. The projected target, or Measured Move, would be the length of the move coming into the pattern.



Dec 21, 2023