A descending triangle pattern is a bearish chart pattern formed by an upper trendline that slopes down through a series of lower highs and a flat horizontal support level underneath. The descending triangle pattern usually signals a continuation of a downtrend, and it can also form as a bearish reversal at the top of an uptrend. Traders confirm a descending triangle chart pattern with a breakdown, which is a downside breakout: a candle that closes below the horizontal support level.
The three most common ways to trade a descending triangle are the breakdown strategy, the pullback and retest strategy and the moving averages strategy. All three strategies share the same stop-loss and price target rules, and this guide walks through each one with a USD/JPY chart example.
What Is a Descending Triangle Pattern? (what-is-a-descending-triangle-pattern)
A descending triangle pattern is a chart pattern made of two lines that converge: an upper trendline, which slopes downward, and a horizontal support level. Price bounces off the horizontal support level at about the same level each time, while each rally stops at a lower high than the one before.
The descending triangle pattern is one of three triangle patterns in technical analysis, alongside the ascending triangle and the symmetrical triangle. Traders also call the descending triangle pattern a falling triangle pattern, a decreasing channel pattern or a right-angle triangle, because the flat horizontal support level and the falling upper trendline meet the left edge of the descending triangle at a right angle.
A descending triangle can form on any timeframe, from 5-minute charts to weekly charts, and in any market, including forex, indices, commodities and shares. On a daily chart, a descending triangle usually takes several weeks to a few months to form.
How Do You Identify a Descending Triangle Chart Pattern? (how-to-identify-a-descending-triangle-chart-pattern)
A valid descending triangle pattern meets six rules. Check all six rules before treating a shape on a chart as a descending triangle.
| Rule | What to look for |
|---|---|
| Existing trend | A trend before the descending triangle forms, usually a downtrend when the descending triangle is a continuation |
| Horizontal support level | At least two swing lows at about the same price, with a rally between each swing low |
| Upper trendline | At least two lower highs, each one below the previous high, sloping down toward the horizontal support level |
| Touches | At least two touches on each line; a third touch on either line makes the descending triangle more reliable |
| Volume | Volume usually contracts while the descending triangle forms |
| Breakdown | A candle closes below the horizontal support level, which completes the descending triangle |
A new high that equals or rises above the previous lower high ends the series of lower highs, and the descending triangle is invalid from that candle onward. Traders then redraw the lines or stop treating the chart as a descending triangle.
| Important: A descending triangle whose swing lows start rising is breaking the momentum structure, so the price action behind it is no longer valid. |
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What Does a Descending Triangle Pattern Indicate? (what-does-a-descending-triangle-pattern-indicate)
To read what a descending triangle indicates, look at the price action on each line and the trader psychology behind it. Each lower high shows selling pressure.
The horizontal support level shows buyer demand at one price. Buyers at the horizontal support level act like a large buy order that absorbs the selling and stops price from falling further, and every new touch uses up more of those buyers, so demand weakens as the descending triangle matures.
A descending triangle is a consolidation, a pause in the trend before the next move, and many traders read the descending triangle as distribution, where sellers keep unloading positions into the remaining buyers. A descending triangle stays incomplete until a breakdown closes below the horizontal support level, because the buyers at that level can hold price up for weeks before they give way.
Is the Descending Triangle Pattern Bullish or Bearish? (is-the-descending-triangle-pattern-bullish-or-bearish)
The descending triangle pattern is bearish. Lower highs pressing against a flat horizontal support level show sellers gaining control, so the usual exit from a descending triangle is a breakdown below the horizontal support level.
A descending triangle can still end with an upside breakout, a candle that closes above the upper trendline, and traders call that result a bullish descending triangle. Upside breakouts happen less often than breakdowns, so wait for a candle to close outside the descending triangle before choosing a side.
Is the Descending Triangle a Continuation or Reversal Pattern? (descending-triangle-continuation-or-reversal)
A descending triangle chart pattern can be a continuation pattern or a reversal pattern. The trend before the descending triangle decides which role the descending triangle plays.
Descending Triangle Pattern in a Downtrend
A descending triangle in a downtrend is a bearish continuation pattern, and the downtrend version is the most common way a descending triangle appears. Price falls, pauses in a consolidation above a horizontal support level, then resumes the downtrend once a breakdown closes below that line.
A breakdown from a descending triangle in a downtrend trades with the existing trend. Many traders prefer the downtrend version for that reason, since the short position and the existing trend point the same way.
Descending Triangle Reversal Pattern at the Top of an Uptrend
A descending triangle at the top of an uptrend is a bearish reversal pattern. After the uptrend, price stops making new highs, each rally stalls at a lower high, and a horizontal support level forms under the rallies.
Volume usually declines while the reversal version of the descending triangle forms, which shows buyers losing interest at higher prices. A breakdown below the horizontal support level ends the uptrend, and the same stop-loss and price target rules apply as for a descending triangle in a downtrend.
When Does a Bullish Descending Triangle Form?
A bullish descending triangle forms in two places. The first is a consolidation inside an uptrend, where an upside breakout continues the existing uptrend; the second is the bottom of a downtrend, where the horizontal support level marks the low and an upside breakout reverses the downtrend.
The bottom reversal is the rarer of the two bullish descending triangle versions and needs more evidence, such as rising volume on the upside breakout. To trade a bullish descending triangle, traders buy after a close above the upper trendline, place the stop-loss below the horizontal support level and project the height of the triangle upward from the upside breakout point.
How Do You Trade a Descending Triangle Pattern? (how-to-trade-a-descending-triangle-pattern)
Trading a descending triangle follows four steps: 1. enter a short position after the downside break out, 2. confirm the breakdown with volume, 3. place a stop-loss above the descending triangle and 4. measure your price target.
Where to Enter a Short Position on a Descending Triangle Breakdown
The standard entry is a short position after a candle closes below the horizontal support level. Waiting for a candle close below the horizontal support level is important because normal price actions often passes through the horizontal support level but recovers before the candle closes.
There are 2 more entry methods or strategies. An aggressive trader prefers to sell on the first candle below the horizontal support level and risks more fake breakouts, while a patient trader waits for a retest on the support level, where price climbs back to the broken horizontal support level then fails to close above it. This gives the retest trader a much more reliable entry as a successful retest is a strong signal that the price will bounce off the support level.
This method is also favoured by forex and cfd traders because with forex trading or CFD trading, a sell order opens the short position directly without needing to borrow shares.
How to Confirm a Descending Triangle Breakout With Volume
Volume usually contracts while a descending triangle forms and expands when the downside breakout or ‘breakdown’ happens. Rising volume on the breakdown candle shows strong momentum, and a breakdown on light volume is likely to fail.
Spot forex has no central exchange, so MT4 and MT5 show tick volume, which counts the number of price changes in each candle. Read the volume rule on tick volume: a breakdown candle with tick volume above the recent average carries more weight than a breakdown candle with tick volume below the average.
Where to Place the Stop-Loss on a Descending Triangle
Place the stop-loss above the most recent lower high at just above the upper trendline. Price that climbs back above shows the sellers have lost control of the descending triangle.
Some traders use a tighter stop-loss just above the broken horizontal support level. A tighter stop-loss means a smaller loss when the trade fails, but tighter stop losses get triggered by normal fluctuations more often so you need to find the balance or choose a safer stop loss that is further away.
The stop-loss distance sets the position size. A stop-loss 100 pips away should only hold half the position size of a stop-loss that is 50 pips away to risk the same amount of money, so measure the stop-loss distance to help choosing the lot size.
News releases and weekend gaps can move price straight through a stop-loss, and the stop-loss order then fills at the next available price. The difference between the stop-loss level and the actual filled price is called slippage, and a slippage can make a loss larger than expected.
| Pro Tip: A stop-loss order or the closing of a short position is actually a buy order that fills at the ask price, so place the stop-loss at least one spread above the most recent lower high to avoid an exit caused by the spread alone. |
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How to Measure a Price Target From a Descending Triangle
Measure the height of the triangle at its widest point, from the first high down to the horizontal support level, then use that height distance as your projected price target distance. Traders call this method a measured move.
A price target is your target for exiting the position. Earlier support levels, round numbers and news events are some examples of commonly chosen stop price targets so some traders close part of the position before reaching their full price target then manage the rest with a trailing stop-loss.
Which Trading Strategies Work With Descending Triangles? (descending-triangle-trading-strategies)
Three trading strategies come up most often with descending triangles. All three strategies use the same stop-loss and price target rules as a standard descending triangle trade, and each strategy changes when the trader enters.
Descending Triangle Breakdown Strategy
The descending triangle breakdown strategy opens a sell position as soon as a candle closes below the horizontal support level on rising volume. The breakdown strategy catches the start of the move and suits traders who are more aggressive and want to catch more profit hence starting the position early in the move.
The weakness of the breakdown strategy is fake out or a fake breakdown. A trader using the breakdown strategy enters at the moment price is most likely to snap back above the horizontal support level.
Descending Triangle Pullback and Retest Strategy
The pullback and retest strategy waits for price to return to the broken horizontal support level after the breakdown. The broken horizontal support level now acts as a resistance level, and the trader opens a short position when price touches that resistance level and closes back below it.
Entering a short position on the retest puts the entry closer to the stop-loss, which improves the risk-reward ratio. However, the trade off for this strategy is that not every breakout retests the horizontal support level, so a trader using the pullback and retest strategy will miss some trades that breakout and never look back (retest).
Descending Triangle With Moving Averages
The moving averages strategy uses a moving average as a filter or as the trigger for a short position. A downside breakout or a breakdown that also closes below a widely watched moving average, such as the 50-day or 200-day moving average, shows the descending triangle also broke through a large momentum level.
Shorter-term traders use a crossover instead, such as a 10-period exponential moving average crossing below a 20-period exponential moving average near the breakdown. Moving averages lag price, so a moving average crossover often arrives after the breakdown candle has already closed.
You can test all three descending triangle strategies on a TMGM demo account in MT4 or MT5 before trading with real money.
Descending Triangle Pattern Example (descending-triangle-pattern-example)
The USD/JPY daily chart in 2015 shows a descending triangle that ended with an upside breakout, which makes it a bullish descending triangle. USD/JPY had been in a strong uptrend through late 2014, so the descending triangle formed as a consolidation inside an existing uptrend.
USD/JPY daily chart: descending triangle from February to May 2015, with the measured move marked.
From late February to May 2015, USD/JPY touched a horizontal support level near 118.80 several times. Each rally stopped at a lower high, starting near 122.00 in March, so the upper trendline sloped down toward the horizontal support level.
- Height of the triangle: The widest point, from the 122.00 lower high to the 118.80 horizontal support level, measures about 310 pips.
- Entry: In late May, a daily candle closed above the upper trendline near 120.30, and a long position opened on that close.
- Stop-loss: The stop-loss went below the horizontal support level, near 118.60, about 170 pips from the entry.
- Price target: Adding the 310-pip height to the upside breakout point near 120.00 gives a price target near 123.10.
USD/JPY reached the price target near 123.10 within about two weeks of the upside breakout. A trader using a 1:2 risk-reward ratio needed about 340 pips of profit against 170 pips of risk, which put the exit near 123.70, and USD/JPY passed 123.70 in early June on the way to about 125.80.
Exiting the long position at a 1:2 risk-reward ratio was enough for the trade to pay off. Holding for the June high near 125.80 would have added more profit, but USD/JPY gave most of that extra profit back within weeks.
The price target level kept mattering after the trade ended. When USD/JPY pulled back from the June high, the area around 123.10 acted as a support level in June and again in August, and after a sharp sell-off in late August, USD/JPY climbed back to the same area by November.
The same rules apply in reverse to a breakdown: sell on a close below the horizontal support level, place the stop-loss above the most recent lower high, and subtract the height of the triangle from the breakdown point.
What Are the Limitations of the Descending Triangle and When Does It Fail? (limitations-of-the-descending-triangle)
A descending triangle has five limitations that a trader should plan for before opening a position.
- False breakdowns: Price closes below the horizontal support level, then climbs back above it within one or a few candles. A breakdown on low volume carries a higher risk of turning into a false breakdown.
- Late entries: Waiting for the breakdown close means entering a short position after part of the move has already happened, and the breakdown can take weeks to arrive.
- Upside breakouts: A descending triangle can break above the upper trendline instead, especially inside a strong uptrend, so a short position opened before the breakdown is a guess.
- Gaps and slippage: News releases and weekend gaps can push price past a stop-loss, so the loss on a descending triangle trade can end up larger than planned.
A descending triangle fails when price reclaims the horizontal support level and then closes above the upper trendline. Short sellers buy back their positions at that point, and the short covering can drive a sharp rally, so the stop-loss above the most recent lower high is what keeps the loss small when a descending triangle fails.
How Is a Descending Triangle Different From a Falling Wedge and Other Triangles? (descending-triangle-vs-falling-wedge-and-other-triangles)
The descending triangle shares a falling upper trendline with the falling wedge and the symmetrical triangle, so the lower line is what separates the patterns. The table compares the descending triangle with three similar patterns on the shape of each line and the usual result.
| Pattern | Upper line | Lower line | Usual bias | Usual result |
|---|---|---|---|---|
| Descending triangle | Slopes down through lower highs | Flat horizontal support level | Bearish | Breakdown below the horizontal support level |
| Falling wedge | Slopes down | Slopes down, less steeply | Bullish | Upside breakout above the upper trendline |
| Ascending triangle | Flat horizontal resistance line | Slopes up through higher lows | Bullish | Upside breakout above the horizontal resistance line |
| Symmetrical triangle | Slopes down | Slopes up | Neutral | Breakout in either direction |
Descending Triangle vs Falling Wedge
A descending triangle has a flat horizontal support level, while a falling wedge has a lower trendline that also slopes down, so both the highs and the lows fall inside a falling wedge. The descending triangle carries a bearish bias and usually ends with a breakdown, and the falling wedge carries a bullish bias and usually ends with an upside breakout.
The falling wedge has its own entry, stop-loss and price target rules, covered in the full falling wedge pattern guide.
Descending Triangle vs Ascending Triangle
An ascending triangle is the mirror image of a descending triangle: a flat horizontal resistance line on top and a rising trendline through higher lows underneath. The ascending triangle is a bullish pattern that usually ends with an upside breakout, and the ascending triangle has its own full guide.
Descending Triangle vs Symmetrical Triangle
A symmetrical triangle has a falling upper trendline and a rising lower trendline, so both lines converge toward the apex. A symmetrical triangle has no bias until the breakout, while a descending triangle leans bearish before the breakdown because of its flat horizontal support level.
Frequently Asked Questions
Is the descending triangle pattern bullish or bearish?
The descending triangle pattern is bearish, because lower highs against a flat horizontal support level show sellers gaining control. A descending triangle that ends with an upside breakout above the upper trendline becomes a bullish descending triangle, which happens less often.
What is a descending triangle breakout?
A descending triangle breakout is the candle that closes outside the descending triangle. The usual result is a downside breakout below the horizontal support level, called a breakdown, and the less common result is an upside breakout above the upper trendline.
What is the difference between a breakdown and a breakout in technical analysis?
A breakout is price moving above a resistance level or below a support level, and a breakout signals that price may start trending in that direction. A breakdown is the downside case: price falling through a support level, which points to further declines.
What is the difference between a descending triangle and a falling wedge?
A descending triangle has a flat horizontal support level and usually signals a bearish continuation after a downtrend. A falling wedge has two downward-sloping lines and usually signals a bullish reversal, even though a falling wedge also forms during a downtrend.
What is the difference between a descending triangle and a descending channel?
A descending channel has two parallel lines that both slope down, with price making lower highs and lower lows inside a downtrend. A descending triangle has a flat horizontal support level and two lines that converge, so price runs out of room and has to leave the descending triangle, while a descending channel can carry on for as long as the downtrend lasts.
Which timeframe is best for the descending triangle pattern?
A descending triangle works on any timeframe, from intraday charts to weekly charts. Descending triangles on daily and weekly charts take longer to form and are generally treated as more significant, while descending triangles on 5-minute or 15-minute charts form faster and produce more false breakdowns.
Is the descending triangle pattern profitable?
A descending triangle can be profitable when a trader waits for the breakdown close, uses a stop-loss above the most recent lower high and sizes each position to a fixed risk. No chart pattern works every time, so the profit from descending triangle trades comes from keeping losses small on false breakdowns and letting winning trades reach the price target.
