Live Trading Example – Descending Tops and Bottoms

Descending Tops and Bottoms - Live Forex Trading Example

This is a live Forex trading example that shows how to forecast bearish impulses with the Descending Tops and Bottoms chart patterns. The video shows the Descending pattern in a combination with a Forex Resistance to foretell turning points and shifts in the forces on the chart.

Bearish Signals Used for the Short Trade

  1. The EUR/USD price reached the resistance level at 1.0735 again.
  2. Then it bounced again from the level.
  3. This way the resistance got tested for third time.
  4. The EUR/USD then created a bottom that is lower than the previous one.
  5. After a pullback, the pair also created a top, that is lower than the previous one.
  6. This confirms a Descending Tops and Bottoms pattern on the chart.
  7. The last bottom prior the trade is fourth in a row and it is the first one that does not touch the resistance at 1.0735.

Stop Loss and Target of the Descending Tops and Bottoms Trade

I decided that the best place of my Stop Loss order is above the resistance at 1.0735. This way I contained all the three tops on that resistance level. After all, if the price returns and creates a higher top above the resistance, this would be a signal that the decrease is not likely to happen. Also, I have said many times that a Stop Loss is not necessarily to be hit. I can always close the trade if the price breaks the upper channel level of the Descending pattern.

As a target of my trade I chose the level of the last bottom on the chart. I did this because a breakout through this level would mean a daily low, which is sometimes hard to achieve. Therefore I played it safe by putting my Take Profit order at 1.0707.

Live Trading Example

Notice that the price action returned to the upper level of the orange bearish channel before resuming the bearish run. The level fully resisted the price action and we saw the another bearish impulse that reached my target.

Also, notice that after that test on the upper channel level the price created a Double Top chart pattern. The figure comes as an additional confirmation of the upcoming bearish impulse.

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Damyan Diamandiev
Damyan Diamandiev

Damyan is a fresh MSc International Management from the International University of Monaco. During his bachelor and master programs, Damyan has been working in the area of financial markets as a Market Analyst and Forex Writer. He is the author of thousands of educational and analytical articles for traders. When being in bachelor school, he represented his university in the National Forex Trading Competition for students in Bulgaria and got the first place among 500 other traders. He was awarded a cup and a certificate at an official ceremony in his university.

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