What Does a Rising Wedge Indicate?Ī rising wedge is a pattern in which the high and low extremes keep expanding. Swing traders use rising wedge formations to predict when to post proper orders. As cryptocurrencies are equally popular and volatile, wedge patterns occur frequently. The gradual shrinking of the price volatility amplitude can signal the upcoming trend change. The trend will likely change direction when the price reaches the resistance or support level. In the wedge pattern, the support and resistance lines narrow with the pattern. In the introduction, we have mentioned that wedge patterns can signal trend flips. Depending on the slant, the pattern might be rising or falling. The formation of the pattern takes up to four weeks. In such parts, trades appear as converging lines creating the pattern. The trend extremes make up a segment known as the wedge formation. It combines a price range going narrow with a descending (falling wedge) or an ascending (rising wedge) trend. A wedge pattern is a specific market trend spotted on the charts graph. What Is a Wedge Pattern?īefore we speak about the rising wedge pattern precisely, we’ll provide a wedge pattern definition. Learning what wedge patterns are and how to use rising and falling wedge patterns can significantly help you to decrease market unpredictability. In many instances, wedge patterns help detect trend reversals, crucial moments for those who make money through long and short trades. The tools developed in those sectors proved to be instrumental in helping crypto traders to maximize profits and prevent losses. As previously mentioned, crypto trading borrows much from the stock market and forex trading. We’ll continue doing so in this piece dedicated to wedge patterns. The rising wedge pattern is a bearish pattern, whether it forms after an established uptrend or during a downtrend, so the next time you spot this pattern on your favorite market exercise caution if you are holding a long position or prepare for an opportunity to get short.We covered many indicators and other trading tools in a series of articles in our blog. A target could again have been placed at the level where the rising wedge started from with a stop loss above the last higher high.Īlways make sure that your potential reward is larger than the risk you are taking on and if your stop loss ends up being too far away, then consider placing your stop above a previous swing high that was formed on the way down, before the support line was broken. This is also a picture-perfect example where price pulled back to the support line, retested it from below and dropped lower. My final chart shows that same multi-year rising wedge that formed in AUD/USD but note that although price made higher highs that the momentum between each peak started slowing down, which is a behavior that these patterns tend to display. Traders Tip: When you are following a rising wedge in real-time, it can be a good idea to watch for momentum divergence on a MACD-Histogram between the higher highs, and use it as an additional confirmation method that a rising wedge might be nearing an end. The ideal place to set a target will be at the lower level where the rising wedge started from, with a stop loss a few pips above the final high before the breakout occurred. Just keep in mind though, that this may not always happen and result in a trader missing an entry. Conservative traders, on the other hand, will generally wait for price to retest the lower support line from below before they will execute a short trade. Since the rising wedge is a bearish pattern, aggressive traders will typically wait for price to break below the lower support line before they will execute a short position. Practice This Strategy How to Trade the Rising Wedge Pattern
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