Rising Wedge & Falling Wedge

Both Rising Wedges and Falling Wedges indicate a pause in a given trend, thereby suggesting a period of indecision among traders. They could signify a reversal or a continuation of the trend.

Rising Wedge Chart

A Rising Wedge can be either a reversal or a continuation pattern, depending on whether it occurs after an uptrend or a downtrend. However, a Rising Wedge is a bearish chart pattern, which means that it is almost always followed by a downward trend.

This pattern is formed as price consolidates between upward support and resistance lines. If a Rising Wedge occurs after a downtrend, it emerges as a continuation pattern. As the chart shows above, this is because the price soon breaks past the resistance line and continues to fall even further.

However, if a Rising Wedge succeeds an uptrend, it occurs as a reversal pattern. As the chart shows below, this is because the price soon breaks past the resistance line and starts heading downwards.

Traders can go short after they spot a Rising Wedge, expecting the price to fall.

Rising Wedge Chart

The Falling Wedge pattern can also be either a trend reversal or trend continuation sign, depending on the details of its formation. Unlike the Rising Wedge, the Falling Wedge is a bullish chart pattern, indicating the commencement of an uptrend.

Falling Wedge Chart

As you can see from the chart above, a Falling Wedge after a downtrend indicates a reversal. Conversely, and as the below chart shows, a Falling Wedge that occurs during an uptrend will usually lead to a continuation of the price movement.

Falling Wedge Chart

Traders can go long after the Falling Wedge comes to a close, expecting prices to rise.

Did you know?

U.S. President Richard Nixon is credited with enabling a free-floating currency system after ending the Bretton Woods Accord.

Word of the day
"Unsystematic Risk" - The level of risk that has an impact on a particular currency pair or currency pairs, but not on the overall condition of the market.
Pro Tip

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