Definition of Descending channel:
A descending channel is drawn by connecting the lower highs and lower lows of a security's price with parallel trendlines to show a downward trend. Officially, the space between the trendlines is the descending channel, which falls under the broad category of trend channels.
A type of downward or descending channel used in signaling a potential change in trend and that is located between two parallel lines that are in a downward sloping shape.
Overall, channels are used broadly by technical traders to identify and follow the trends of securities over time. A descending channel is one such charting pattern that technical analysts will use to evaluate the trend of a security. A channel is drawn from trendlines charted along the support and resistance levels of a security’s price series. In general, channels can be used to pinpoint optimal support and resistance levels to buy or sell securities.
How to use Descending channel in a sentence?
- Traders who believe a security is likely to remain within its descending channel can initiate trades when the price fluctuates within its channel trendline boundaries.
- A descending channel is drawn by connecting the lower highs and lower lows of a security's price with parallel trendlines to show a downward trend.
- A more potent signal occurs with a breakout, which is when a security's price breaches an established channel's boundaries, either on the upper or lower side.
Meaning of Descending channel & Descending channel Definition