Using the Rising Wedge Pattern in Forex TradingThe rising wedge is a popular reversal pattern that is predictive and can give traders clues about the direction and distance of the next price movement. This article will explain how to find a rising wedge on a forex chart and how to trade it.

What is A Forex Rising Wedge Pattern?

The forex rising wedge pattern (also known as a rising wedge) is a strong consolidation price pattern that forms when the price binds between two uptrend lines. This is considered a bearish chart formation which can show reversal and continuation patterns depending on the location and trend bias. Regardless of where the wedge appears, traders should always maintain guidance that this pattern is inherently bearish.

How To Identify Wedge Rising Patterns On Forex Graphics

The rising wedge pattern is defined as a bearish continuation and bearish reversal pattern which confuses identifying the pattern. The two scenarios contain a different set of observational dynamics that must be considered.

Continuation Pattern:

  • An established downtrend
  • The wedge consolidation formation rose
  • Connect the highs and lows higher using the converging trend line towards the narrowing point
  • Confirm the difference between price and volume using the volume function – MACD can also be used
  • Overbought signals can be confirmed by other technical tools such as oscillators
  • Look for a break below support for short entry

Are You Using the Rising Wedge Pattern in Forex Trading?

Reversal Patterns:

  • Establish an uptrend
  • The wedge consolidation formation rose
  • Connect the highs and lows higher using the converging trend line towards the narrowing point
  • Confirm the difference between price and volume using the volume function MACD can also be used
  • Overbought signals can be confirmed by other technical tools such as oscillators
  • Look for a break below support for short entry

Target Price

Wedge patterns can be a sign of a significant reversal. A breakout might show price moving in the direction of the breakout for an extended period. Therefore, the wedge pattern is not used for long-term price targets.

Rather the pattern gives us analytical insight into where the price is headed, and the entry points into what could be the start of a major step. After the breakout, the price usually moves at least the height of the wedge.

Conclusion

Estimate how far the price can move after the breakout by measuring the height of the pattern, but understand that if the main trend is taking place, the price could move further. If you are long (Buy) during the Rising Wedge, a downside breakout is a warning sign to exit. If you are short (Sell) on a Falling Wedge and the price breaks upwards, consider getting out.

Rising wedges can last a long time, narrowing down to a smaller price area. This can result in anticipating when it will end later, or trading before the breakout, thinking that it is imminent. Better to wait until the actual breakout occurs than to speculate when it will occur.