Forex Chart Pattern: Descending Triangle
The descending triangle pattern is similar to the symmetrical triangle except for the lower trend line forming a horizontal line that serves as support. The descending triangle pattern generally indicates the bearish tendency and is most reliable when it appears as a continuous pattern in the descending trend. In this pattern, the seller slightly exceeds the number of buyers. The market becomes oversold and the price starts to move up. However, then sellers re-enter the market and prices are pushed down to recent low levels, where purchases happen once again. The seller re-entered the market, but at a higher number than before. The result is a stable low level, which is more or less the same but there is a series of lower levels. Eventually, the price breaks the support level where the lowest position is formed and pushed lower as sales increase and accompanied by an increase in volume.
In reading the chart with the continuous pattern Descending Triangle, the entry signal is given when the price breaks through the descending triangle pattern to the downside (support level). This should happen around 66% inside the triangle. If the price break of the lower border of the triangle (support) occurs near the top (tip) of the triangle, the entry signal is invalid because the penetration of this support tends to be less momentum and has a higher chance of chance failure
The price projection of the descending triangle can be calculated by taking the widest part of the triangle and subtracting it from the breakout level. Alternatively, the trend line can be drawn parallel to the trend support line angle leading to the breakout movement. The distance of the support line and the trend line could be an extension of the target price for the next move.
In using this continuous descending triangle graph pattern, you should be able to identify a valid support level and draw a descending trend line. It can also be interpreted that price movement in this descending triangle pattern is the movement of the narrowed price range. And when there is a breakout or price breakout at the support it should be followed by increased price and volume momentum as well. This will recently be a valid entry signal.