The visual representation of a real rising wedge pattern is in the figure below which is a typical example of a rising wedge pattern that is found at the end of the trend and which signals a trend reversal.Īlternatively, the rising wedge pattern can also be found in a downtrend, and it acts as a continuation pattern. Let’s now look through some real chart examples of the rising wedge pattern. You can also add a buffer to neutralise the short-term market noise. The stop loss placement for the rising wedge pattern is above the highest high point on the chart. The price target of this price formation should be the height of the wedge projected down from the breakout point. The strategy holds both for the rising wedge as it does to the falling wedge. Once the breakout has occurred, typically the price should never look back. The textbook strategy to trade the rising wedge pattern is to wait for a break and close below the support line sloping upwards. Now that we know what we’re looking for in the market, we can start looking at how we can place trades using the rising wedge pattern. Moving forward, let’s look at how to enter the trade, place your stop and place the target for the rising wedge pattern. If the rising wedge pattern is something you want to incorporate into your trading, then you need to train your eyes to spot the shape you see in the image below: The support line is steeper than the resistance line.Īnother characteristic of the rising wedge is that with each successive new high, there should be a loss in the bullish momentum and subsequently signalling the bullish trend is becoming weaker. The second element of the rising wedge is a series of higher lows that can be connected using a support line sloping upwards. The lower highs series can be connected using a resistance line sloping upwards. The ascending wedge pattern is composed of a series of higher highs followed by a series of higher lows. Then we will go over a straightforward trading strategy to take advantage of the reversal price structure. In the first part of this trading guide, we will show you how to identify the wedge chart pattern in real time. The wedge pattern has an identical price structure as the symmetrical triangle however, the difference comes from the fact that the support and resistance lines rise or fall depending on the wedge pattern type. However, the wedge pattern can also serve as a continuation pattern in which case it looks similar to the one in the figure below: The above image highlights the rising wedge and falling wedge when they act as a reversal chart pattern. In the study of technical analysis, there are two types of wedges: Regardless of the environment where you see the wedge pattern, the price structure will remain the same the only difference is the location within the trend. The market tends to form these patterns over and over again. Rising and falling wedge chart patterns are classic chart patterns that can be found either at the end of the trend and usually signal market exhaustion or trend continuation.
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