Web Trader MT5
Downtrend refers to a market that is fashionably establishing steadily lower highs and lows over time. That is the technical definition, and it is worth retaining since it is more accurate than merely stating that a price is falling.
One bad day is not a downtrend. A short-run pullback in an uptrend is not a downtrend. A downtrend is a directional movement in which every attempted recovery fails to reach the previous peak, and each subsequent sell-off undercuts the previous trough.
Traders use this to make decisions: in a confirmed downward trend, rallies are more likely to be selling opportunities than signs of a turnaround.
Downtrends occur in all timeframes, be it intraday charts or longer-term price history, and can affect individual stocks, sectors, currencies, or even whole markets.
Example: A technology stock records poor performance in January, crashes, then in February sees a half-baked recovery but fails to regain the January level, and then again in March falls to a new low.
That would be a sequence of lower highs, lower lows, which is a downtrend in the making, and technically, the trader would take any bounce with a grain of salt until the pattern breaks.
