On This Page
- What is a descending triangle?
- How to identify a descending triangle
- Worked example
- Descending triangle breakdown and price target
- Descending triangle retest and finish
- Descending vs ascending and symmetrical triangles
- How traders use a descending triangle
- Limitations of the descending triangle
- Bottom line
- FAQ
Key Takeaways
- A descending triangle is bounded by a horizontal lower trendline and an upper trendline that slopes down across successive lower highs.
- Use the actual break to select direction. This example activates below $100 support.
- The selected base height is $112 − $100 = $12. Projecting down from the $100 boundary gives $88.
- Separate the breakdown entry from a later retest entry and calculate each from its own price.
- Mark the trigger, stop reference and objective, then calculate the entry-to-stop and entry-to-target distances.
What is a descending triangle?
A descending triangle is a chart pattern with repeated lows near one horizontal support level and a falling line across its rally highs. Each rally stalls lower as price keeps returning to the same floor. A break below support activates the downside setup, a break above the falling line activates the upside setup, and the pattern’s height sets a measured price objective.
How to identify a descending triangle
Select the chart interval, identify the swings and define the price event that activates the setup.
The example declines from $118, tests $100 support four times, and forms highs at $112, $109 and $106.50. The upper line connects $112 and $109; the later $106.50 high sits just beneath it.
Formula
Selected height = first pattern high − horizontal support; downside objective = selected breakdown anchor − height; upside objective = selected breakout anchor + height- The example uses a $112 initial high and $100 horizontal support, giving $12.
- The selected downside anchor is the $100 boundary, giving an $88 objective.
- Assumed entry at $98.60 is separate from the boundary used to project the target.
- For an upside setup, specify the corresponding upper-boundary or breakout-price anchor.
Worked Example
XYZ declines from $118 and tests $100 support four times. Its rallies reach $112, $109 and $106.50. The next move closes at $98.60 below support. Assume a short entry at $98.60 and a fixed stop reference at $103.50.
- Pattern height: $112.00 − $100.00 = $12.00
- Downside measured target: breakout price $100.00 − $12.00 = $88.00
- Assumed short entry $98.60 with fixed stop reference $103.50 inside the former range: $4.90 per share
- Entry-to-target / entry-to-stop = $10.60 / $4.90 = 2.16
Price moves to $94, returns to $99, then declines to $88.40, finishing $0.40 above the $88 objective. At the $99 retest, it is $0.40 above the assumed short entry and $4.50 below the fixed stop reference.
Descending triangle breakdown and price target
The selected rule activates at a close below $100. The example closes at $98.60.
Base height = $112 − $100 = $12. The boundary-anchored objective is $100 − $12 = $88.
Assume short entry at $98.60 with a fixed stop reference of $103.50. At the breakdown observation the upper line is $104.80, so this stop reference is inside the former range. Entry-to-stop distance is $4.90 and entry-to-target distance is $10.60, giving a 2.16 ratio.
Descending triangle retest and finish
Price first reaches $94, then returns to $99 and declines to $88.40. The finish is $0.40 above the objective.
At the retest, price is $0.40 above the assumed short entry and $4.50 below the stop reference. A separate retest-entry plan would use its own entry and size calculation.
Descending vs ascending and symmetrical triangles
An Ascending Triangle reverses the geometry. A Symmetrical Triangle has two sloping boundaries.
Use the actual breakout direction and the preceding trend to distinguish continuation from reversal.
How traders use a descending triangle
Measure participation through Relative Volume using matched intervals.
For the downside scenario, compare long puts, put debit spreads and call credit spreads in the Options Profit Calculator using the selected price objective, expiration, premium and volatility inputs.
Limitations of the descending triangle
- Trade the break that occurs. A close below $100 activates the downside setup, and a break above the falling upper line activates the upside setup.
- Fix the boundary rule before the break. Which lows count as support and which highs anchor the falling line can change the height, the target and the stop.
- Use the measured objective as a planning target, and take profits or tighten the stop as price approaches it. The example finishes $0.40 above $88, but another breakdown can stop well short of its objective or run past it.
- Set the stop inside the former range before entry. If a breakdown fails and returns inside the triangle, that stop reference defines the planned loss.
- Write the chart interval and the activation rule into the plan. A close below support and an intrabar trade below it trigger at different times.
Bottom line
A descending triangle shows rallies weakening against a flat floor of support, which gives a clear breakdown level, a stop inside the former range and a measured objective. Define the activation rule and the boundaries before the break, size from the entry-to-stop distance, and tighten the stop as price approaches the target.
Clear answers
Frequently Asked Questions
Sources and Further Reading
How entries are sourced, calculated and updated: editorial methodology.