Web Trader MT5
A descending channel is a chart pattern in technical analysis characterized by price action moving downward between two parallel, downward-sloping trend lines. The top is a line of lower highs, the lower is a line of lower lows. These two occur together, creating a channel through which price action moves downward.
Descending channels help traders identify the boundaries of a downtrend. The upper line will normally be a level where rallies lose momentum, and sellers take the lead again. The bottom trend seems to play the role of a support level – that is, it’s a point at which buyers place orders before prices fall further.
When the price breaks above the upper trend line, it is typically interpreted as a sign that the downtrend may have ended and that momentum has turned. If it’s below the bottom line, the price is going down.
Example: A commodity has been going down for three months, consitently forming lower highs and lower lows. A trader draws the descending channel, observes that the price gets close to the upper resistance line after making a small bounce, and uses that as a cue to look for short entry signals – treating the channel boundary as a likely turning point unless price breaks convincingly above it.
