Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

What is Downtrend in Forex Trading? Technical Analysis

Forex Educational Video Series

Author: Andreas Thalassinos (BSc, MSc, MSTA, CFTe, MFTA), Head of Education at FXTM.

What is Downtrend in Forex Trading?

We’ve covered uptrend, so it’s only natural that we discuss its polar opposite next: 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!

Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.

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