What is a descending triangle pattern in trading?
Learn to spot descending triangle patterns, understand their shape and structure, and explore how they can signal bearish or bullish moves – with practical tips for trading them.
What is a descending triangle pattern?
A descending triangle is a chart pattern that can occur during periods of market consolidation. It is predominantly considered a bearish signal, suggesting that sellers may eventually overwhelm support and trigger a downward movement.
Descending triangles can form as the market repeatedly tests a flat support, represented by consistent lows, while sellers become increasingly active at lower prices; this results in declining peaks that create a downward-sloping resistance.
A breakdown is typically confirmed when the price falls below the pattern’s support line, often accompanied by increased trading volume.
Past performance is not a reliable indicator of future results.
Why descending triangles matter in technical analysis
The descending triangle pattern matters in technical analysis because it signals the potential continuation of bearish momentum in existing downtrends. It’s distinguished by two distinct trendlines, which represent support and resistance:
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A horizontal support that shows where the price consistently finds buying interest
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A descending resistance, which connects a sequence of decreasing highs.
As prices fluctuate between lower highs and a steady, horizontal support, the chart shows persistent selling pressure while buyers continue to defend a key level. A breakdown below support confirms the pattern, which could suggest the potential for a continuation of a downtrend.
For CFD traders, the descending triangle can help identify when selling pressure is prevailing. When combined with independent research such as technical indicators and fundamental analysis, this pattern may provide context for assessing potential market moves or managing risk in open positions.
Descending triangle pattern in bullish vs bearish markets
The descending triangle pattern can appear in both bullish and bearish markets, but its implications may differ depending on the prevailing trend.
Descending triangle (bear market)
A descending triangle most commonly acts as a bearish continuation pattern. Here, price forms a series of lower highs while repeatedly testing a flat support level. Each failed rally suggests that sellers are becoming more aggressive, pushing the market down to the same support.
If price breaks decisively below this level – with increasing volume – it signals that selling momentum is likely to continue. Monitor for rising volume as price breaks below support. This adds weight to the bearish signal.
Descending triangle (bull market)
In an uptrend, a descending triangle can suggest a potential bearish reversal, reflecting distribution as selling pressure increases. The flat support and lower highs indicate weakening buying interest. A breakdown below support – particularly on rising volume – provides evidence of a possible bearish reversal.
While upside breakouts are possible and do occur, they are generally less frequent than downside moves, though outcomes depend on context and timeframe. Volume expansion at the breakout point helps validate the move.
While traditionally viewed as bearish, the pattern's outcome depends on breakout direction, volume confirmation and market context. Recognising these distinctions can help you effectively interpret opportunities and risks in different market conditions.
How to trade a descending triangle
- 1. Open a brokerage account
To access financial derivative markets, you will need an active brokerage account with a regulated provider, like us. Compare CFD trading platforms for key features such as market access, fee structure, platform functionality, and account types.
Ensure that the broker offers instruments suited to your strategy and provides sufficient execution speed. Account opening typically requires verification of personal information and documentation in accordance with regulatory standards. - 2. Confirm the breakoutWait for a clear break of the horizontal support line. A noticeable rise in trading volume can add weight to the move. However, some breakouts occur with only moderate volume. Volume confirmation may help signal participation but is not always present, so caution is warranted.
- 3. Entry strategyTraders may choose to enter a short position immediately after price closes below support, or opt to wait for a potential retest. A retest involves the price briefly returning to the broken support (now acting as resistance) before moving lower. This can add confirmation but may also mean missing the initial move.
- 4. Set stop-loss ordersTo manage risk, you could place a stop-loss just above the most recent lower high or above the descending trendline, though all stop placements are subject to market conditions and may not prevent losses from sudden price moves. It can be useful to adjust for volatility to help reduce the chance of being stopped out by normal price swings.
- 5. Plan profit targetsEstimate a profit target by measuring the vertical distance between the highest point of the descending triangle and the support line, then projecting this distance downward from the breakout. Alternatively, nearby support zones or previous lows may provide logical exit points. These targets are guidelines only, and price may not always reach these levels.
- 6. Confirm with volume and indicatorsExpanding volume on the breakdown can provide further support for the signal. To strengthen the setup, consider confirmation using additional technical indicators to assess the breakout’s quality.
- 7. Manage position size and riskSize your position to suit your risk tolerance and overall strategy. Trailing stops may be used to help protect unrealised gains as the price moves in your favour. Note that trailing and guaranteed stops (where offered) involve specific features and fees.
Real-world example of a descending triangle pattern
Alibaba (BABA) descending triangle: 2020-2021
Between December 2020 and May 2021, Alibaba shares demonstrated a textbook descending triangle pattern:
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Support (horizontal base) – repeated support was clearly established around $222-225, with multiple notable touches in December 2020, January 2021, March, and April, as price consistently found buyers near this level.
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Descending resistance – lower highs formed consistently, illustrating increasing selling pressure as each rally lost strength sooner than the last.
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Compression phase – price action noticeably tightened from February to May 2021. Each upward swing topped out lower than the previous one, clearly marking the triangle’s narrowing structure.
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Breakdown and follow-through – on 10 May 2021, BABA closed below the critical $222-225 support. This breakdown was confirmed by subsequent price action, as the price continued to decline, falling below $139 in September 2021.
Past performance doesn’t guarantee future results.
