FALLING WEDGE REVERSAL PATTERN HOW TO

Distance from entry (buy order) to take profit 3 (this is the same height as the back of the wedge 2).As in method one, this is done by taking the height of the back of the wedge and by extending that distance up from the entry: The price finds support at the upper side of the falling wedgeįinally, the last chart shows the profit target.In order to avoid false breakouts, you should wait for a candle to close above the top trend line before entering.Īs the following chart shows, the stop loss would go below the new support area: Once you have identified the falling wedge, one method you can use to enter the pattern is to place a buy order (long entry) on the break of the top side of the wedge. The chart below shows a falling wedge in an uptrend: Again, this means that you can look for potential buying opportunities. It indicates the resumption of the uptrend. Identifying the falling wedge pattern in an uptrendĪ falling wedge found in an uptrend is considered a continuation pattern that occurs as the market contracts temporarily. The chart below shows an example of a falling wedges in a downtrend: The falling wedge usually precedes a reversal to the upside, and this means that you can look for potential buying opportunities. It occurs when the price is making lower highs and lower lows which form two contracting lines. If the falling wedge appears in a downtrend, it is considered a reversal pattern. Identifying the falling wedge pattern in a downtrend

FALLING WEDGE REVERSAL PATTERN HOW TO

This lesson shows you how to identify the pattern and how you can use it to look for possible buying opportunities. The more number of times it tests the trend lines, the stronger is the pattern signal.The falling (or descending) wedge can also be used as either a continuation or reversal pattern, depending on where it is found on a price chart.

The strength of the wedge is judged by how many time the price movement tests the support and resistance trend line.

The falling wedge pattern is considered complete, when the price breaks out above the top trend line, i.e., buyers have taken control of the security.

The rising wedge pattern is considered complete, when the price breaks out below the bottom trend line, i.e., the sellers have taken control.

In the falling wedge the upper trend line (the resistance), has a greater slope than the bottom trend line (the support).The opposite is the case for rising wedges, i.e., it is bearish in nature. A falling wedge is bullish in nature signaling a reversal of trend from downtrend to uptrend.Some of the important characteristics of the wedge pattern are listed below: A falling wedge is formed during a downtrend, and is used to predict the price movement from a downtrend to an uptrend. An upward sloping wedge is known as Rising wedge, while the downward sloping wedge is known as Falling wedge.Ī rising wedge is formed during an uptrend, and is used to predict the price movement from an uptrend to a downtrend. During the time of the formation, the prices oscillate up and down between a range, and this price range keeps reducing. It is characterized by a gradually contracting range of security price in an upward or a downward direction.

The wedge pattern is a commonly found pattern in security prices. In this article, we will discuss the two popular reversal patterns, namely, Rising and Falling Wedge. In the Chart Patterns Overview, we discussed that reversal chart patterns signal the ending on an ongoing trend, i.e., they signify a reversal of asset’s price direction.

Falling wedge reversal pattern