DECREASING (Price Decrease Indicator)

The DECREASING indicator is a technical analysis tool that identifies consecutive periods of declining prices. It helps traders spot downtrends and potential selling opportunities by measuring the number of periods where each closing price is lower than the previous period's close.

Formula

DECREASING = Current Close < Previous Close
Returns true if price has been decreasing for n consecutive periods
Where:
n = number of periods to check for decrease (typically 2-5 periods)

How DECREASING Works

The DECREASING indicator compares consecutive closing prices to identify sustained downward price movements. It generates a signal when prices have been declining for a specified number of periods. This helps traders identify established downtrends and potential continuation patterns. The indicator is particularly useful for trend following strategies and for timing entries into short positions.

Trading Strategies Using DECREASING

Strategy Examples

Enter short positions when prices decrease for 3 or more consecutive periods
Use decreasing periods to confirm downtrend continuation
Combine with oversold indicators for potential reversal signals
Monitor volume during decreasing periods for confirmation
Use as a filter for other bearish trading strategies

Support and Resistance Strategy

Look for decreasing periods near major resistance levels
Use consecutive decreases to confirm resistance breakdowns
Monitor price action at previous support levels
Combine with volume analysis at key price levels
Use multiple timeframe analysis for key levels

Trend Identification

Multiple decreasing periods indicate strong downtrend
Use longer decrease sequences for trend confirmation
Monitor decrease frequency for trend strength
Compare decrease patterns across timeframes
Look for decrease clusters in price action

Advantages and Limitations

Advantages

Simple and easy to understand
Clear signals for trend identification
Works across all timeframes
Effective for trend confirmation
Can be automated easily

Limitations

May generate false signals in choppy markets
Doesn't account for size of price decreases
Can be late for trend reversal signals
Requires confirmation from other indicators
May miss important price patterns

Best Practices When Using Decreasing Indicator

Combine decreasing signals with other technical indicators for confirmation
Use multiple timeframes to validate decreasing patterns
Wait for multiple consecutive decreasing periods before taking action
Consider overall market context when interpreting decreasing signals
Monitor volume alongside decreasing periods for stronger confirmation
Look for divergences between price action and decreasing patterns
Set appropriate stop-loss levels based on decreasing patterns
Be cautious of false signals during ranging or choppy markets
Use decreasing patterns to help time market exits
Regularly review and adjust your decreasing period settings based on market conditions