Forex Descending Triangles:

A descending triangle is a bearish pattern used in technical analysis and can be easily recognized. To say a pattern as a descending triangle it should have flat lows and lower highs. That means it should have a horizontal support line at the bottom and a descending trend line at the top. Descending triangles are bearish because the sellers are able to maintain a low price, but the buyers can’t maintain a high price. Descending triangles work best when the previous trend in the market is to the downside.

Check the following picture which shows a descending triangle. A horizontal line is drawn at the bottom connecting the lows and descending trend line is drawn at the top connecting the peaks. This formed a descending triangle.

Forex Descending Triangle

Trading Entry:

Since descending triangles are bearish patterns wait until the bottom horizontal support line is broken with a strong candlestick. A strong candlestick means a candlestick which has a large body and small tails or no tails at all. Once the candlestick is completed enter the trade. Check the following picture. In the following picture the support line is broken with strong candlestick. Moreover the candlestick does not have long tails. So it is a good opportunity to enter a short trade.

Forex descending triangle broken by the strong candlestick body

If the resistance line is broken by the tail of a candlestick and not by the body of the candlestick and moreover if the candlestick has a long tail then do not enter the trade. Check the following picture. In the following picture the bottom support line is broken by the tail of the candlestick and not by the body of the candlestick. Moreover the candlestick has a long tail. So do not enter the trade.

Forex descending triangle broken by the candlestick tail

Take profit and stop loss:

Once the bottom support line is broken with a strong candlestick, wait for the candlestick to be completed and enter the trade. Measure the base of the triangle. The difference between the bottom support line and the highest high is the base of the triangle. The price difference should be the same as the breakout. Once breakout occurs enter trading. Set stop around 5 to 10 pips inside triangle. Set the profit target (Limit) around 5 pips less than amount of the triangle base.

For example the base of the triangle is 50 pips. So the expected break out is 50 pips. Once the break out occurs the candlestick penetrated around 10 pips downward. So the remaining breakout is 40 pips. Since we have to use the profit target around 5 pips below the expected break out the target will be 35 pips. Check the following picture.

Take profit and stop loss

The following are some of the real time examples.

GBPUSD hourly chart descending triangle:

GBPUSD hourly chart descending triangle

AUDCAD hourly chart descending triangle:

AUDCAD hourly chart descending triangle