Learn Basics of Downtrend and use it to take short position


Downtrend also known as falling trend. A downtrend is a series of lower highs and lower lows. A downtrend line is a descending line and can be drawn by connecting two or more high points having lower highs. Down trend line acts as a resistance as long as the price remains below the trend line.

Each high in a downtrend signals a probable selling point. More points in the trendline indicates more validity and strength of the trend.

Volume like other technical indicators plays a vital role in affirming the trend. In a downtrend the volume decreases as the trendlines continues downside. An increase in volume activity signals that the bears are losing is over bulls. One may also pay attention to other technical indicators like MACDRelative Strength Indicator (RSI), etc., for confirmation and strength of the trend.

Now we have understood what Downtrend is. Now its time to look into other trends pattern and how they are interpreted in real time. Please follow these links to find about trends. We have explained them in details and provided you with ample real life examples of them.

Example of Downtrend Chart Pattern Formed By Reliance Industries Ltd.