Forex Dance Patterns

Rising Wedges


Jul.18.2013

Rising Wedges are another form of continuation chart patterns which look like a wedge shoe kicking something in the air.  Just as its name suggests, a rising wedge is the opposite of a falling wedge.

 

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In a rising wedge, both lines are rising, but one of them is steeper than the other.

Rising Wedges and a Wedge Shoe Comparison Rising Wedges and a Wedge Shoe ComparisonA rising wedge can serve as either a reversal or a continuation pattern, and it usually causes a sharp bearish market.

A rising wedge is a temporary interruption of a downtrend. It is a reversal signal when it forms during an uptrend.

Let’s think of a wedge as a “squeezing factory.” The happy pair is dancing upward when it starts getting squeezed in a wedge. The puppet masters of the forex party are deciding where to take the pair next, and therefore trading volume drops toward the end of the wedge. After the pair is squeezed enough that it can’t take it anymore, it suddenly and sharply breaks out—to the downside. This is called a rising wedge breakdown.

Rising Wedges During and Uptrend Rising Wedges During and Uptrend

The upward-moving pair gets squeezed in a rising wedge, then it “breaks down”

If the pair is dancing in a downtrend before entering the “squeezing factory,” the wedge is nothing but an interruption in the pair’s downward movement.

Rising Wedges During a Down Trend Rising Wedges During a Down Trend

Downtrend is interrupted by a rising wedge formation

Wedges can take anywhere between two and eight weeks to complete. So they sometimes occur on weekly charts, but they are too brief to appear on monthly charts. The best time frames for trading a wedge are daily or 4-hour charts.

How to Make Some Pips off  Rising Wedges

1) Confirm the pattern

2) Wait for the confirmation of a break in the support level (the lower line of the wedge)

3) Be aware of false breaks

4) Place an entry order to sell the pair right below the lower line of the wedge

5) Close the position at the price where the pair has moved down the same amount as the height of the beginning of the formation.

6) Enjoy the pips

 

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Summary of the Wedges

Simply put, a falling wedge leads to an uptrend, which means that it is a bullish chart pattern. A rising wedge leads to a downtrend, which means that it is a bearish chart pattern. That’s it!

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