The descending wedge pattern appears within an uptrend when price tends to consolidate, or trade in a more sideways fashion. Get My Guide How to Trade the Falling Wedge Patternīelow are various ways to trade the falling wedge using technical analysis: Look for break above resistance for a long entry.Oversold signal can be confirmed by other technical tools like oscillators.Look for divergence between price and an oscillator like the RSI or stochastic indicator.The two lines will slope downwards and converge Link lower highs and lower lows using a trend line.A falling wedge is a continuation pattern if it appears in an uptrend and is a reversal pattern when it appears in a downtrend. The differentiating factor that separates the continuation and reversal pattern is the direction of the trend when the falling wedge appears. Both scenarios contain different market conditions which must be taken into consideration. The falling wedge pattern is interpreted as both a bullish continuation and bullish reversal pattern which gives rise to some confusion in the identification of the pattern. Traders ought to know the differences between the rising and falling wedge patterns in order to identify and trade them effectively. The rising wedge pattern is the opposite of the falling wedge and is observed in down trending markets. It is considered a bullish chart formation but can indicate both reversal and continuation patterns – depending on where it appears in the trend. The falling wedge pattern is a continuation pattern formed when price bounces between two downward sloping, converging trendlines. This article provides a technical approach to trading the falling wedge, using forex and gold examples, and highlights key points to keep in mind when trading this pattern. In this case, the trader can stop the loss and stay in the market until it reaches the set limit.The falling wedge pattern (also known as the descending wedge) is a useful pattern that signals future bullish momentum. But in the case of the rising wedge, a pullback may not be necessary, and the price movement can be very aggressive thus, a pullback may not occur, and the price continues with the ongoing trend. It is advisable not to jump to a decision immediately after the breakout and wait for a possible pullback signal. Then, just as the trend is confirmed, traders can decide to enter the market. Therefore, one must put a stop-loss to provide free space for price movement. However, there is always a possibility of false breakouts. The breakout in the resistance line indicates that one can enter the market but according to the direction of the break. While working with the rising wedge, its bottom or lower line is its resistance or signal line. For example, in rising wedges, the volume for down strings is higher than a higher upswing in ascending triangle.Ī practical approach while using the wedge or a triangle is to look for the breakouts and the pullbacks within the resistance line or the signal line of the pattern. If it is bullish, the pattern is the ascending triangle if it is bearish, it is the rising wedge.Īnother approach to differentiate between the two is when one pays attention to both patterns’ volume. Also, one can confirm the pattern by noticing the trend that follows the pattern. The slope in the case of the rising wedge is upward-pointing, while in the case of the ascending triangle, it is instead a straight line, and it is the bottom line that is approaching the convergence line. First, one can look at the pattern and acknowledge the slope of the resistance line or the upward line of the pattern. If you are new to trading, it becomes essential to understand how to differentiate these patterns. One indicates a potential exit opportunity from the market, while the other indicates an entry point. However, what they indicate is entirely contrary. As mentioned before, differentiating between the rising wedge and the ascending triangle patterns can be confusing due to their similar looks and uncommon use amongst traders.
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