Downtrend
A series of lower highs and lower lows in price, indicating sustained bearish momentum.
A downtrend is a sequence of lower highs and lower lows, signalling sellers are in control. It ends when that sequence breaks.
A downtrend is a price pattern where each successive high is lower than the previous high and each successive low is lower than the previous low. It signals that sellers are in control and buyers cannot push the price back to prior levels. Downtrends end when the sequence of lower highs and lower lows is broken.
How It Works
- Confirmed when at least two consecutive lower highs and two lower lows are visible
- Trendlines connecting the lower highs create a descending resistance line
- Pullbacks within a downtrend often stall at previous support levels that have flipped to resistance
- Moving averages slope downward during a downtrend and act as dynamic resistance
Trading Tips
Trade with the trend: look for short entries on pullbacks to resistance rather than trying to pick the bottom
If price is below the 50 and 200-period moving averages, the downtrend is intact
Set trailing stops that follow the descending trendline to lock in profits as the trend continues
Downtrend Example
Say EUR/USD peaks at 1.1000, rallies fail at 1.0950 then 1.0900, with lows stepping 1.0880, 1.0830, 1.0780. Lower highs with lower lows for two months: shorting rallies paid the whole way while dip buyers funded it.
How Traders Use Downtrend
Sell downtrends at the last lower high with stops above it, never chase breakdowns mid-fall. Counter-trend longs get half size and quick exits. The trend stays guilty until price prints a higher high and higher low.
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