07 What is Downtrend? – FXTM Technical Analysis Basics

07 What is Downtrend? – FXTM Technical Analysis Basics


We’ve covered uptrend, so it’s only natural that we discuss its polar opposite: the downtrend! Downtrend is a series of successively lower tops and lower bottoms, which create a downward pattern on the price chart. Though they are completely opposite, the downtrend is like the uptrend: if its pattern holds, it remains intact. The line that connects two or more tops is called the ‘downtrend line’. A minimum of two tops are needed to make a downtrend line. But the more tops used to draw that line, the more traders feel confident in the downtrend because it reinforces the direction. The downtrend line acts as the “resistance” while the bottoms act as “support”. In this context, the usual trajectory of price is that, once it reaches the downtrend line, it rebounds to register even lower. When demand becomes greater than supply, the downtrend line will be breached. Next up is the final type of trend which isn’t even a trend line! We’re talking range. See you then!

Leave a Reply