What is a Downtrend?
Downtrend
Forex Trading Glossary
Quick Answer: A downtrend features lower highs and lower lows, signalling persistent selling pressure and bearish sentiment.
What is a Downtrend?
A downtrend is a sequence of lower highs and lower lows indicating sustained selling pressure. Recognizing a downtrend helps traders avoid buying too early and instead align with bearish momentum.
Downtrend Checklist
- Structure: Price consistently prints lower swing highs and lows.
- Moving averages: Short-term averages remain below long-term averages.
- Momentum: Oscillators stay in bearish territory.
- Volume: Down days often show heavier volume.
Stay Objective
Do not assume every bounce is the bottom. Require evidence of trend reversal before flipping bullish.
Downtrend Strategies
- Sell rallies: Short into resistance within the trend.
- Breakout trades: Enter when price breaks support with conviction.
- Trailing stops: Use moving averages or swing highs to lock profits.
- Risk control: Keep position sizes moderate because bear markets can be volatile.
Related Terms
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