Downtrend

downtrend

A series of price declines in a security or the general market. Many analysts feel that investors should avoid securities in a downtrend until the pattern is broken. Compare uptrend.

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Downtrend

A situation in which a security price is moving mostly downward. Though there may or may not be a few upticks in between, this does not stop the overall bearish trend. For example, a security may be priced at $100 per share on January 1, $90 on January 10, and $85 on January 31. This indicates a downtrend, even if the security closed higher on certain days in January.

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Downtrend

What Does Downtrend Mean?

Describes the price movement of a financial asset when the overall direction is downward. A formal downtrend occurs when each successive peak and trough is lower than the ones found earlier in the trend.

Notice how each successive peak and trough is lower than the previous one. For example, the low at point 3 is lower than the low at point 1. The downtrend will be deemed broken once the price closes above the high at point 4. A downtrend is the opposite of an uptrend.

Investopedia explains Downtrend

Many traders seek to avoid downtrends because they can affect the value of any investment drastically. A downtrend can last for minutes, days, weeks, months, or even years, and so identifying a downtrend early is very important. Once a downtrend has been established (series of lower peaks), a trader should be very cautious about entering into new long positions.

Related Terms:
• Average Directional Index—ADX
• Bear Market
• Business Cycle
• Trend Analysis
• Uptrend