Web Trader MT5
A descending triangle is a technical analysis chart pattern created by a flat horizontal support line at the bottom and a descending trend line at the top, with price compressing between the two over time. Generally, the pattern is deemed bearish. The logic is simple. The rallies are weakening, the declining upper line shows sellers jumping in at lower and lower prices.
Meanwhile, the bottom support line is holding up, which means buyers are holding a certain range. But continuous failure to climb higher tells you that buying pressure is waning.
Eventually, the support line breaks and when it does the breakdown tends to be severe since the traders holding the line tend to have their stops activated at the same time. The pattern is most reliable in a larger decline and is used as a continuation pattern instead of a reversal pattern.
Example: A currency pair has been going down for weeks. Sellers are capping each bounce at lower levels, while buyers are defending a flat support area at a crucial level, forming a descending triangle. The support fails after a few tests. Volume surges, stops are hit and the pair declines significantly confirming the pattern and extending the existing slump.
