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Descending Triangle Pattern How to Find and Trade It

Furthermore, Dogecoin’s profile as one of the largest cryptocurrencies by market cap is aiding its price rally. Therefore, DOGE’s uptrend may continue in the coming weeks if the general market sentiment remains positive. Despite the drop in trading volume, the general mood remains optimistic as the ‘buy’ signal continues to pique market players’ attention and confidence. The Descending Triangle, also a variation of the symmetrical triangle, is generally considered to be bearish and is usually found in downtrends.

The stop loss target is also placed above the resistance line to protect from bigger losses. For a Descending Triangle, X is defined as the distance between the highs and lows of the Descending Triangle chart pattern. For our exit strategy, we’re going to use one of our favorite trading techniques. Instead of focusing on a static and random profit target, we’re going to use the dynamics of the price action to obtain more accurate profit targets. Additionally, the breakout candle must also produce a close below the flat support level for a valid trade setup. Let’s look at an example of a day trading opportunity to catch a reversal using the descending triangle on an intraday time frame.

It suggests the bulls have run out of steam, and that downwards price action is on the horizon. It happens when a crypto price reaches a new high, drops down slightly, then goes on to retest the highs it just set. However, this second surge is typically unable to breach the previous high and the price starts dropping. It suggests that the bulls were not able to push the price up the second time.

As you can see, the minimum measure distance is nothing but the project from the initial high. Depending on your charting platform, you will notice that volume bars also change. This is because they reflect the bullish/bearish sentiment based on the Heikin Ashi candlesticks. Volume bars serve an additional purpose to alert you to a potential bullish breakout. In this video, our trading analysts explain how to identify and trade the descending triangle pattern. The descending triangle is one of three triangle patterns used in technical analysis.

In the next section of this trading guide, you’ll learn how to trade the descending triangle. Let’s see if we can get some trade ideas from the descending triangle breakout. Therefore, the descending triangle is usually in the middle of a bigger trend that helps the sellers to extend the downtrend.

How accurate is a descending triangle pattern?

As illustrated below, the descending triangle is a bearish continuation chart pattern. The price action trades in a clear downtrend, as there is a series of the lower lows and lower highs. The sellers, who are in control of the price action, take a temporary pause to consolidate their most recent gains before extending the downtrend lower. In this strategy, traders simply need to wait for the descending triangle pattern to be formed. Once the pattern has been identified, the next step is to wait for the bullish trend to pick up. In most cases, you will find that the Heikin Ashi candlesticks turn bullish prior to the breakout.

  • Stop looking for the Holy Grail and learn how to trade as the pros do.
  • Chart technicians can make use of the descending triangle pattern in order to trade potential breakouts.
  • A stop loss should be placed at the highest level of the last price swing inside the triangle.
  • You can use descending triangle patterns to anticipate potential price declines.

The same concept of measuring the distance from the support to the first high is used to determine targets. This is then projected to the upside for the minimum price objective. These transfers are likely aiding Dogecoin’s rally in the past week due to increased on-chain activity. Also, the general price uptick in the crypto market led to a rally for meme coins. According to the crypto tracking platform Whale Alert, a dormant address holding over 5.39 million DOGE tokens valued at $372,461 has been reactivated.

The moving averages can be a great source to alert you when to initiate a trade. In the following example, we use a 60-minute stock chart for General Motors (GM). Traders can experiment with their own settings on the period of the moving average; this depends on the time period that you use. For example, for a daily chart time frame, you can use the 10, 20 or 20 and 50 period settings. One of the main characteristics unique to Heikin Ashi charts is the fact that they can depict the trend easily.

In the next section of this article, we illustrate five descending triangle trading strategies that can be used. takes no responsibility for loss incurred as a result of the content provided inside our Learning Hub. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. One important aspect to keep in mind when trading the breakout is where you should place your stop-loss order.

Engulfing patterns and tweezers

Also, the Moving Average Convergence/Divergence (MACD) is above its signal line, displaying a buy signal on the weekly chart. Moreover, the green Histogram bars confirm that the buyers are not yet done with the accumulation of DOGE. If DOGE breaks above the $0.071 resistance level, it will likely continue on its rally in the coming weeks. In both cases, the take-profit level is calculated by measuring the distance between the high and the low of the descending triangle. This vertical line is then copied and projected at the breakout point. The endpoint of this vertical line is the level where one should close the winning trade.

Where to place Target and Stop Loss?

It forms when the price is making a series of lower highs and testing a horizontal support level multiple times. The pattern is created by connecting the support level with a horizontal line and joining the lower highs with a descending trendline. The descending triangle is a bearish chart formation that occurs during consolidation within a bigger downtrend move. The price action usually consolidates near lows and is characterized by a series of lower highs and horizontal lows. The triangle chart pattern is named as such because it resembles a triangle.

However, the stochastic RSI rating of 63.04 and moving below its signal line on the 24-hour price chart suggests that Dogecoin may still face some resistance in its upward movement. This trend indicates that there could be a temporary pullback or consolidation before the bullish reversal entirely takes hold. If the stochastic RSI rating remains below its signal line for an extended period, it could indicate a potential loss of momentum and a continuation of the selling pressure. Moreover, a distinct falling wedge pattern has emerged in Dogecoin’s price chart, hinting at a potentially significant shift in market dynamics. This pattern occurred after Dogecoin recorded four consecutive lower highs and lows. The falling wedge pattern suggests that selling pressure may be weakening, and buyers could start to regain control.

How to Trade a Descending Triangle

In case the price action returns within a triangle, the pattern is invalidated, and the stop loss is triggered. The first way you can trade this pattern is to enter once the support level has been broken and the price starts to move to the downside. You can wait for a candle to close below the support level before looking to go short. So, wait for the price to “confirm” your bias before shorting the markets after a retest of the descending triangle pattern. Just count how many pips there are from the flat support line to the highest point of the triangle.

When the pattern’s breakout occurs, it’s usually indicative of a bearish move. The breakout’s direction and price projection, determined by the widest distance of the pattern subtracted from the resistance breakout, can serve as a crucial guideline. However, this target isn’t absolute and should be used with other technical analysis tools. Measure the distance from the horizontal support to the initial high and project this distance from the breakout level. The classic version of this pattern forms with a trend line that is sloping and a flat or a horizontal support line. The pattern emerges as price bounces off the support level at least twice.

Descending triangles assume that momentum will drive a stock price lower when it breaks this milestone level. In contrast to the symmetrical triangle, a descending triangle has a definite bearish bias before the actual break. The symmetrical triangle is a neutral formation that relies on the impending breakout to dictate the direction of the next move. For the descending triangle, the horizontal line represents demand that prevents the security from declining past a certain level. It’s as if a large buy order has been placed at this level, and it’s taking a number of weeks or months to execute, thus preventing the price from declining further.

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