7.14What is a downtrend?
1What is it?
A downtrend has lower highs and lower lows.
2Why does it exist?
Sellers are consistently accepting less. Buying in a downtrend is "catching a falling knife".
3Diagram
4Quick revision
- Lower highs and lower lows.
- Avoid catching falling knives.
5Knowledge check
Q1. Define a downtrend.Show answer
Lower highs and lower lows.
Q2. What does "catching a falling knife" mean?Show answer
Buying a stock that is still falling sharply.
Q3. What could signal a downtrend is ending?Show answer
A higher high or higher low forming.