Trading Wedge Chart Patterns
What Is A Wedge Chart Pattern?
A wedge is formed on a chart when two trend lines converge. It is a signal that the price action on either side of the trend is decreasing, and it appears as though traders are taking a pause before deciding where they would like to potentially move the market next. It is a big deal when wedges appear in these patterns because it means that there is a pause in the current trend that has been developing, and a new trend may be ready to start to take over.
Rising Wedge
This is a bearish pattern that forms after the pair has been trading down for some time. It takes place when the slope of the lines is pointed up, and the trend until that time has been down. The rising wedge formation may be a sign that it is time to place a sell order, or at least to get out of the buy order that you have already placed previously.
Key Notes on Rising Wedges:
1. Often leads to a downtrend, which means it’s a bearish pattern
2. Indicates that higher lows are being formed faster than higher highs
3. Rising wedge formation after an uptrend is usually a bearish reversal pattern
4. Rising wedge formation after a downtrend is usually a downward continuation