Caution: Trading involves the possibility of financial loss. Only trade with money that you are prepared to lose, you must recognise that for factors outside your control you may lose all of the money in your trading account. Many forex brokers also hold you liable for losses that exceed your trading capital. So you may stand to lose more money than is in your account. does not guarantee the profitability of trades executed on its systems. We have no knowledge on the level of money you are trading with or the level of risk you are taking with each trade. You must make your own financial decisions, we take no responsibility for money made or lost as a result of using our servers or advice on forex related products on this website.
Expand Offer

Save $228 on our Trade Together program, paid for by our partner.

Learn More

Save $228 on our Trade Together program, paid for by our partner.

Learn More

How To Trade The Descending Channel Pattern

  • 5 mins read ●
  • Last Updated:
descending channel pattern, trading

Are you familiar with channel patterns? How about the descending channel pattern? In this article, we will teach you how to recognize, interpret, and trade this powerful chart formation.

  • The Descending Channel Pattern is a bearish chart formation used in technical analysis to identify potential downtrends in the market.
  • This pattern is characterized by two parallel, downward-sloping lines defining the lower highs and lower lows of a security’s price movement.
  • Traders often use the Descending Channel to strategize short-selling opportunities and to set stop-loss orders, anticipating breakouts or continuations of the trend.

Here is what you can find in this article.

What Is The Descending Channel Pattern? 

The descending channel pattern is a bearish chart formation. It develops within pronounced downtrends in asset pricing. 

Forex traders view descending channels as evidence of weakened strength in the counter currency. Accordingly, it is frequently used to sell a currency pair and join the prevailing market downtrend.

How To Identify the Descending Channel Pattern in Trading?

One of the biggest advantages of the descending channel chart pattern is its appearance. The pattern is readily discernable and consists of three parts: an upper channel line, a lower channel line, and a price channel.

upper trendline lower trendline channels

Upper Channel Line

The upper channel line connects the upper bounds of price action. Essentially, it is an upper trend line that defines the top of a periodic trading range.

The upper channel line slopes downward. It represents a collection of lower highs, which indicates that a series of incremental price drops has taken place.

Lower Channel Line

The lower channel line connects the lower bounds of price action. It is a lower trend line that defines the bottom of a periodic trading range.

Like the upper line, the lower channel line also slopes downward. It connects a series of lower lows and indicates that an ongoing bearish trend is present.

Price Channel

The area between the upper channel line and the lower channel line is known as the price channel. It represents a series of price bars encapsulated by two parallel lines.

For the descending channel pattern, the price channel consists of a trading range that falls between parallel trend lines. Bearish price action is evident as the channel itself exhibits a downward trajectory. Due to these characteristics, the price channel is a bearish channel.

How To Trade the Descending Channel Patterns – Trading Strategies with Examples

Descending channels furnish the trader with a multitude of strategic options. Two of the most common are trend following and reversal breakout approaches.

Trend Following

As in the name, the descending channel suggests that a downtrend in price is evident. Thus, it can be a viable sell signal or queue to short the market with the prevailing trend. Because the trade is with the trend, a greater risk vs reward ratio may be applied

To execute this strategy competently, you must use the channel to identify an optimal trade location. By entering a sell order from the upper bounds of the channel, one can secure short-side market exposure. 

Trend Following Example

descending channel sell limit

The GBP/USD chart above gives us a clear example of how to use the descending channel to short a market. Here is the process:

  1. Identify and draw the channel.
  2. Enter a sell limit order from just beneath the upper trend line at 1.2170.
  3. Place a stop-loss order above the upper trend line at 1.2200.
  4. Locate a profit target order at 1.2110 according to a 1:2 risk vs reward ratio.
  5. Upon the profit target being hit, a 60-pip gain is realized.

Reversal Breakout

Contrary to trend-following strategies, descending channels may also be used to project a shift in a prevailing bearish trend. This is done by waiting to buy the market on price breaks above the channel’s upper extreme.

To trade reversal breakouts, you buy the market above the upper trend line. In doing so, a new long position is opened. Stop-loss orders are placed beneath the channel with profit targets located above the channel.

Reversal Breakout Example

descending channel buy limit

The GBP/USD chart above illustrates the functionality of a reversal breakout trade. Below is the process by which this strategy is executed:

  1. Identify and draw the descending channel.
  2. Place a buy-stop or stop-limit order above the upper trendline at 1.2270.
  3. Locate a stop-loss order beneath the channel at 1.2237.
  4. Set a profit target above the channel at 1.2301, adhering to a slightly sub-1:1 risk vs reward ratio.
  5. Upon the profit target being hit, a 31-pip profit is realized.

Descending Channels – Pros And Cons

Like any other technical analysis pattern, the descending channel has a collection of distinct pros and cons. Below are a few of the most important.


  • Trend following strategies that implement descending channels can produce large sell-side profits. If a bearish trend is strong, forex traders can ride the channel for hundreds of pips.
  • The pattern is evident in every market on every time frame. This is ideal for traders seeking an abundance of trade setups. 
  • Descending channels gives the trader strategic flexibility. They may be used to follow trends, trade breakouts, or identify reversals.


  • On large timeframes, channels can be wide. Due to the wide channel, stop loss locations can be distant, making trades expensive to execute.
  • The pattern features reduced efficacy on shorter timeframes. 
  • During periods of market consolidation, descending channels have a tendency to produce false signals.

Here are the key takeaways from trading the Descending Channel pattern.

Key Takeaways
  1. The descending channel pattern occurs during a bearish trend in the market. It consists of three parts: an upper trend line, lower trend line, and price action channel.
  2. Descending channels may be traded in many different ways. Two of the most popular are trend following and breakout reversal strategies.
  3. Like all other forms of technical analysis, this chart pattern isn’t infallible. In flat markets it can produce false signals and evident trends can suddenly fade. 
  4. Within the context of a comprehensive trading plan, descending channels can be a valuable tool for buying or selling a market.

Frequently Asked Questions about the Descending Channel Pattern

Here are a few of the most frequently asked questions we receive on the descending channel pattern.

Is the descending channel a reliable trend-following indicator?

Yes. However, no indicator is 100% accurate. Proper risk management is advised when using the descending channel to trade trends.

When is it best to use a descending channel?

That is up to you! Descending channels appear in every market in every timeframe. They may be used to execute intraday, day, or swing strategies. 

I am a momentum trader. Will the descending channel work with RSI or Stochastics?

Descending channels function well with a variety of indicators. This includes momentum oscillators such as RSI and Stochastics.

Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.

Trade Like a Predator Hunt for Opportunities

Sign up now for FREE access to our exclusive trading strategy videos. Want more? Explore our Trade Together program for live streams, expert coaching and much more.

Here’s what you’ll get:

Identifying high probability scalping setups
When to scalp and when to stay out
Precise entries and exits
Position sizing and risk management
HTT Piranha Strategy Course thumbnail
By clicking the 'Learn Free Now' button you agree to our Terms of Service and Privacy Policy
HTT Connor, arms crossed

In partnership with our recommended partner SwitchMarkets partnering broker logo


1Register with Switch Markets.
2Verify your identity.
3Unlock Trade Together program for free!
Learn More

"Join our Trade Together program and interact with us in real-time as we trade the markets together."

HowToTrade Coaches