There are two types of wedge patterns, which include falling and rising wedge. The second chart example shows the conservative entry method, whereby traders will wait for a break of the lower support line and a retest of the same line before they enter short positions. In this article, we will explore both the ascending wedge and descending wedge price patterns, their main characteristics, and how to trade them.

Rising (or ascending) wedges don’t just look like the opposite of falling ones. They signify the opposite price action too, with the upward momentum of the pattern itself set to turn into a renewed downtrend if the market breaks down through support. Falling wedges are the inverse of rising wedges and are always considered bullish signals. They develop when a narrowing trading range has a downward slope, such that subsequent lows and subsequent highs within the wedge are falling as trading progresses. Rising wedges have a relatively low risk/high reward ratio and, as a result, they are a favorite among professional technical traders.

The Rising Wedge Pattern

Since the patterns are drawn based on automated software, use discretion when deciding which wedge patterns to use for trading or analysis. Here’s an example of a falling wedge in an overall uptrend, which uses the Oil & Gas share basket https://www.bigshotrading.info/ on our Next Generation trading platform. Price action is one of the best-known day trading strategies in the market. In previous articles, we have looked at some of the most popular price action trading strategies in the market.

The descending wedge pattern, also known as a falling wedge, typically appears at the end of a bearish market before a strong bullish breakout occurs. Both the upper resistance and lower support lines also converge as price moves lower in a narrowing range. With descending wedges, the upper https://www.bigshotrading.info/blog/how-to-trade-rising-wedge-pattern/ and lower trendlines are drawn by connecting the lower highs and lower lows to form the familiar wedge shape. A rising wedge pattern is a bearish reversal pattern that occurs in an uptrend. It is characterized by higher highs and higher lows that are converging to form a triangle shape.

Is a Rising Wedge Bullish or Bearish?

The symmetrical wedge pattern follows the same wedge trading strategy rule, but the only difference is that we have a more practical way to measure our profit target. There are many opportunities to trade the symmetrical wedge pattern. This pattern can appear at the end of a bullish trend as well as at the end of a bearish trend. More than simply being a reversal pattern, this can also be traded as a continuation pattern.

• Swing traders use rising wedge formations to predict when to post proper orders.
• Traders who have sold the downside
  breakout or who have bought the upside breakout will have their stops triggered
  when prices move against their positions.
• A falling wedge is generally considered
  bullish and is usually found in uptrends.
• In other words, the market needs to have tested support three times and resistance three times prior to breaking out.
• A rising wedge is a chart formation that indicates a slowing momentum of the previous move up.

In this case, the market is still in a bullish bias and the ascending pattern simply indicates corrections in the trend. The rising wedge is a pure price consolidation pattern that appears at the end of an uptrend. As you can see in the USD/JPY daily chart below, the pattern can be identified by a contracting price range (two converging trend lines) during a bullish uptrend. In this article, we are going to help you understand what is the rising wedge pattern, and how to trade currency pairs using this effective charting pattern. As you can see on this chart, a falling wedge typically appears at the bottom of a downtrend.