Teaching sketch. It shows the shape, not a live quote and not a trade signal.
Definition
A downtrend is progress downward. Rallies fail below the prior rally, and declines break the prior low. The offer is in control of the swings, even if some candles are green.
How to identify it
Swing highs stepping down and swing lows stepping down. A falling moving average can agree, but the swings are the definition. A moving average can lag a turn that the swings have already made.
Bullish reading
A close above the last lower high is the first structural warning that the downtrend is tiring. One higher low after that is stronger evidence than a single rally candle.
Bearish reading
Rallies are selling opportunities until a lower high breaks. Risk on a short sits above the last lower high. The trend is intact while lower lows continue.
Common mistakes
Buying a downtrend because price looks cheap or oversold. Oversold can stay oversold while lower lows continue.
Limitations
A downtrend on a five-minute chart may be a pullback inside a daily uptrend. Trade the timeframe you analysed.
This note explains the term. A sketch shows the shape of the idea. Neither is a recommendation, a signal, or a comment on any security. Indicator settings and exchange conventions differ. Check the live chart and the contract specification before you use a number.