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    How To Trade Wedge Chart Patterns

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    stephen briggs
    - A wedge pattern forms when two converging trend lines show that price movements are decreasing in magnitude. Wedges can signal either a continuation of the existing trend or a reversal. - A rising wedge forms during an downtrend or at the end of an uptrend, and is bearish, signaling either a continuation of the downtrend or a reversal to a downtrend. A falling wedge forms during an uptrend or at the bottom of a downtrend, and is bullish, signaling either a continuation of the uptrend or a reversal to an uptrend. Wedges provide trading opportunities on a break of the trend lines.

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    How To Trade Wedge Chart Patterns

    Uploaded by

    stephen briggs
    134 views11 pages
    - A wedge pattern forms when two converging trend lines show that price movements are decreasing in magnitude. Wedges can signal either a continuation of the existing trend or a reversal. - A rising wedge forms during an downtrend or at the end of an uptrend, and is bearish, signaling either a continuation of the downtrend or a reversal to a downtrend. A falling wedge forms during an uptrend or at the bottom of a downtrend, and is bullish, signaling either a continuation of the uptrend or a reversal to an uptrend. Wedges provide trading opportunities on a break of the trend lines.

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    How to Trade Wedge Chart Patterns_

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    - A wedge pattern forms when two converging trend lines show that price movements are decreasing in magnitude. Wedges can signal either a continuation of the existing trend or a reversal. - A rising wedge forms during an downtrend or at the end of an uptrend, and is bearish, signaling either a continuation of the downtrend or a reversal to a downtrend. A falling wedge forms during an uptrend or at the bottom of a downtrend, and is bullish, signaling either a continuation of the uptrend or a reversal to an uptrend. Wedges provide trading opportunities on a break of the trend lines.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    134 views11 pages

    How To Trade Wedge Chart Patterns

    Uploaded by

    stephen briggs
    - A wedge pattern forms when two converging trend lines show that price movements are decreasing in magnitude. Wedges can signal either a continuation of the existing trend or a reversal. - A rising wedge forms during an downtrend or at the end of an uptrend, and is bearish, signaling either a continuation of the downtrend or a reversal to a downtrend. A falling wedge forms during an uptrend or at the bottom of a downtrend, and is bullish, signaling either a continuation of the uptrend or a reversal to an uptrend. Wedges provide trading opportunities on a break of the trend lines.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 11

    How to Trade Wedge

    Chart Patterns
    • In a Wedge chart pattern, two trend lines converge.
    • It means that the magnitude of price movement within the Wedge pattern is
    decreasing.
    • Wedges signal a pause in the current trend.
    • When you encounter this formation, it signals that forex traders are still
    deciding where to take the pair next.
    • A Falling Wedge is a bullish chart pattern that takes place in an upward
    trend, and the lines slope down.
    • A Rising Wedge is a bearish chart pattern that’s found in a downward trend,
    and the lines slope up.
    • Wedges can serve as either continuation or reversal patterns.
    Rising Wedge
    • A rising wedge is formed when the price consolidates between upward sloping support and
    resistance lines.
    • Here, the slope of the support line is steeper than that of the resistance.
    • This indicates that higher lows are being formed faster than higher highs. This leads to a wedge-like
    formation, which is exactly where the chart pattern gets its name from!
    • With prices consolidating, we know that a big splash is coming, so we can expect a breakout to
    either the top or bottom.
    • If the rising wedge forms after an uptrend, it’s usually a bearish reversal pattern.
    • On the other hand, if it forms during a downtrend, it could signal a continuation of the down move.
    • Either way, the important thing is that, when you spot this forex trading chart pattern, you’re ready
    with your entry orders!
    • In this first example, a rising wedge formed at the end of an uptrend.
    • Notice how price action is forming new highs, but at a much slower pace than when price makes
    higher lows.
    •
    • See how price broke down to the downside? That means there are
    more forex traders desperate to be short than be long!
    • They pushed the price down to break the trend line, indicating
    that a downtrend may be in the cards.
    • Just like in the other forex trading chart patterns we discussed
    earlier, the price movement after the breakout is approximately
    the same magnitude as the height of the formation.
    • Now let’s take a look at another example of a rising wedge
    formation. Only this time it acts as a bearish continuation signal.
    • As you can see, the price came from a downtrend before consolidating and
    sketching higher highs and even higher lows.
    • In this case, the price broke to the downside and the downtrend continued.
    That’s why it’s called a continuation signal yo!
    • See how the price made a nice move down that’s the same height as the
    wedge?
    • What did we learn so far about these Japanese candlestick chart patterns?
    • A rising wedge formed after an uptrend usually leads to a REVERSAL
    (downtrend) while a rising wedge formed during a downtrend typically results
    in a CONTINUATION (downtrend).
    • Simply put, a rising wedge leads to a downtrend, which means that it’s a
    bearish chart pattern!
    Falling Wedge
    • Just like the rising wedge, the falling wedge can either be a reversal or continuation signal.
    • As a reversal signal, it is formed at a bottom of a downtrend, indicating that an uptrend would come next.
    • As a continuation signal, it is formed during an uptrend, implying that the upward price action would
    resume. Unlike the rising wedge, the falling wedge is a bullish chart pattern.
    • In this example, the falling wedge serves as a reversal signal. After a downtrend, the price made lower
    highs and lower lows.
    • Notice how the falling trend line connecting the highs is steeper than the trend line connecting the lows.
    • Upon breaking above the top of the wedge, the pair made a nice move upwards that’s approximately
    equal to the height of the formation. In this case, the price rally went a few more pips beyond that target!
    • Let’s take a look at an example where the falling wedge serves as a continuation signal.
    • Like we mentioned earlier, when the falling wedge forms during an uptrend, it usually signals that the
    trend will resume later on.
    • In this case, the price consolidated for a bit after a strong rally. This could
    mean that buyers simply paused to catch their breath and probably recruited
    more people to join the bull camp.
    • Hmm, it looks like the pair is revving up for a strong move. Which way would
    it go?
    • See how the price broke to the top side and went on to climb higher?
    • If we placed an entry order above that falling trend line connecting the pair’s
    highs, we would’ve been able to jump in on the strong uptrend and caught
    some pips!
    • A good upside target would be the height of the wedge formation.
    • If you want to go for more pips, you can lock in some profits at the target by
    closing down a portion of your position, then letting the rest of your position
    ride.

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