A descending triangle is formed when price action moves between a line of resistance which slopes downwards and a line of support which is relatively flat or horizontal. As a result the two lines converge and when this happens the chance of a break out increases. Price movement below the line of support contributes to the continuation of pattern ends and the downtrend. In contrast with Ascending Triangle in this formation market is making higher lows and lower highs. Therefore, neither the buyers nor the sellers push the price up to make a clear trend. Due to Descending Triangles technical traders can make a profit during a short period of time. Price targets are usually set to equal the entry price minus the vertical height between the two trendlines.
A descending triangle is formed by the convergence of a downtrend line at the top and a horizontal support line at the bottom. The upper trendline forms a downward slope depending on the lower highs. The lower trendline which signifies an area of support is derived from the candlestick lows. This type of triangle is represented by a narrowing price range between high and low prices. So, the main feature that distinguishes descending triangle from other types is that it has a descending trendline connecting lower and lower highs and a horizontal trendline connecting the lows at the same level.
The downtrend line is the descending line where the traders are willing to sell the currency pair at lower and lower price.Whereas the support line is a horizontal line where the traders are willing to buy. A breakout below the horizontal support line is considered a potential signal to close out. In the same way a sell signal is received when the price breaks below the support line usually somewhere between three-quarters and halfway of the way through the pattern.
The price depending on the descending triangle pattern formation generally falls at least to its target level. It is calculated in the following way:
T = S – H,
T – target price;
S – support (horizontal line);
H – pattern’s height (distance between support and resistance lines at pattern’s origin).