Descending triangles are mainly considered continuation patterns but they also can be used as reversals. This pattern starts with an initial impulse move followed by a point of consolidation. As price consolidates it makes lower highs and equal lows forming the descending triangle. the momentum builds up and usually breaks out back into the direction of the trend. If price does break back into the direction of the trend then look for a continuation and the target is the Distance Between The Mouth Of The Triangle Added To The Breakout but preferably I use a 100% extension of the first impulse move.
Conventional way to trade a bullish Descending Triangle pattern:
-----Breakout----- (1) Wait for a clear Decending Triangle to form. (2) Buy a break of the previous high. (3) Stop below the previous Lows. (The Triangles Low) (4) Target 1 Is the Distance Between The Mouth Of The Triangle Added To The Breakout. (5) Target 2 is a 100% extension of the first impulse move.
-----PullBack----- (1) Wait for a clear Desending Triangle to form. (2) Wait for price to break and close above previous high. (3) Buy pullback at prior high. (4) Stop below the previous Lows. (The Triangles Low) (5) Target 1 Is the Distance Between The Mouth Of The Triangle Added To The Breakout. (6) Target 2 is a 100% extension of the first impulse move.
Conventional way to trade a Bearish Descending Triangle pattern:
-----Breakout----- (1) Wait for a clear Descending triangle to form. (2) Sell when price breaks the triangle low. (3) Stop Abouve the previous High. (4) Target 1 Is the Distance Between The Mouth Of The Triangle Added To The Breakout. (5) Target 2 is a 100% extension of the first impulse move.
-----PullBack----- (1) Wait for a clear Descending triangle to form. (2) Wait for price to break and close below triangles low. (3) Sell pullback at the broken lows. (4) Stop Abouve previous High. (5) Target 1 Is the Distance Between The Mouth Of The Triangle Added To The Breakout. (6) Target 2 is a 100% extension of the first impulse move.
Mate. I just got into an argument because of your post. Why did you say that a Descending Triangle in an uptrend is a continuation pattern??? It's not, it's mainly a bearish pattern in an uptrend! It needs to be written as "A Descending Triangle in an uptrend is mainly considered a bearish reversal pattern but can also be a continuation pattern if it's a confirmed as a false breakdown". A typical continuation pattern in an uptrend is an Ascending Triangle or a Falling Wedge. The Descending Triangle can however, be a confirmation of a bottom in a downtrend in which case you will see reversal to the upside. The descending line indicates buyers are loosing control, the same way in an Ascending Triangle an Ascending Line indicates sellers are loosing control, so unless it's a false breakdown, how can this be seen as a straight up continuation pattern?? Please explain your reasoning behind what you've posted 👍. Many thanks