A downtrend is a sustained pattern of declining prices characterized by lower highs and lower lows over time. Downtrends reflect sustained selling pressure and negative market sentiment toward an asset. Technical analysts identify downtrends using trend lines, moving averages, and momentum indicators to guide trading decisions and risk management.

Downtrends can persist for weeks, months, or years depending on fundamental factors and market conditions. Trading strategies for downtrends include short selling, buying put options, or avoiding long positions until trend reversal signals emerge. Understanding downtrend characteristics helps traders align with prevailing market direction and avoid fighting persistent selling pressure.

Real-world example: Netflix stock enters a downtrend, declining from $400 to $200 over six months with a series of lower highs and lower lows, prompting technical traders to maintain bearish positions until reversal signals appear.