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A rising wedge is a technical indicator, suggesting a reversal pattern frequently seen in bear markets. This pattern shows up in charts when the price moves upward with pivot highs and lows converging toward a single point known as the apex. When it is accompanied by declining volume, it can signal a trend reversal and a continuation of the bear market. A rising wedge is generally a bearish signal as it indicates a possible reversal during an up-trend.
In this case, you will observe that you will get a slight downward slant in the wedge pattern by connecting the lower highs and lows before rising prices. This will eventually lead to a falling wedge breakout to continue on the larger uptrend formation. What is important in this method is to lace the stops at the appropriate places so that there is some space available before the final closing out of any trade. falling wedge bullish or bearish
Another essential point to mention is the angles of the trend line for the wedge. It is easy to draw a flag or channel instead of a wedge due to misaligning the gradient. 10 and 45 degrees are the approximate angles to produce the sloping direction.

What is a descending wedge pattern?


Finally, the trend will reverse and begin an uptrend as the market becomes more bullish. It may seem like a bearish trend, but it is in fact a bullish reversal pattern. This signifies the end of a downtrend and a shift towards an uptrend. Any bearish breakout after a descending triangle signals an increasing probability that there could be a continuation of the existing bearish trend.
The decreasing volume suggests that the sellers are consolidating their energy before they start pushing the price action lower towards the breakout. Still, if you don’t feel like spending too much time on learning all about trading and technical analysis, maybe the right move would be to shuffle off this task to trading crypto robots. There’s an old adage in poker, which is essentially trading on a set of incomplete information that there are three levels to attain before you can be considered a professional player.


Because a falling wedge is a bullish pattern, traders should wait for the resistance level to break before entering a short position. To identify a bullish pennant, you’ll need to watch for two elements. Firstly, a pronounced upward movement beforehand known as the ‘pole’. Secondly, a price consolidation that forms a roughly symmetrical triangle with its support and resistance lines. The reversal is either bearish or bullish , depending on where the trend line meets, what the trading volume is, and whether the wedge is falling or rising.

Rising Wedge Pattern


The price continues in the direction it moved previously, often in a parabolic fashion. Both beginners and advanced traders use seemingly complex chart patterns to speculate on an asset’s price movements and make intelligent trading decisions. As one of the bullish reversal patterns, the falling wedge pattern is formed after downward pressure which emanates from large selling by whales and institutional investors.

While a pennant may seem similar to a wedge pattern, as mentioned in the previous section, wedges are much more narrower than pennants. Moreover, wedges differ from pennants because wedges are always ascending or descending, whereas pennants remain horizontal. Rounding Bottom A rounding bottom is both a bullish continuation and a reversal.

Identifying it in an uptrend


This is why wedge patterns are so essential to the art of trading cryptocurrency. To prevent confusion and keep things simple, some traders may only choose to hunt for triangle set-ups and disregard wedges. In this way, they cover potential reversals or continuations without a different pattern with similar features. As you start trading, you just look at what you’re holding and how the price is moving. As you get better, you begin to look at pattern formations and how the market is “playing” . Note that predicting chart patterns and price movements yield probabilistic results, not certainties.
Falling wedge patterns form by connecting at least two to three lower highs and two to three lower lows which become trend lines. The falling wedge pattern name might throw you off because it sounds like it’d be bearish but it isn’t. Falling wedge patterns are bigger overall patterns that form a big bearish move to the downside. They form by connecting 2-3 points on both support and resistance levels.
  • It uses a sublime understanding of the mechanics of market structure.
  • Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism.
  • Since the rising wedge pattern has a particularly distinct configuration, it can advise traders and investors to look out for impending top and reverse prices.
  • The rising wedge chart pattern can fit in the continuation or reversal category.
  • The rising wedge is a bearish chart pattern that begins with a wide trading range at the bottom and contracts to a smaller trading range as prices trend up.

The key is your trend lines should be angled at roughly 45 and 10 degrees, respectively, to maintain the wedge shape. When drawing the falling wedge, first spot an existing downtrend on your chosen time frame. Like most geometric-based patterns, you’ll often use a ‘cut and try’ approach. The rising wedge has the same entry and exit parameters as the Ascending Triangle.

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When combined with the rising wedge pattern, it makes a significant pattern that indicates a shift in the direction of the trend. Generally, a falling wedge is seen as a reversal, though there are instances where it might help a trend continue rather than the reverse. Due to shrinking prices, volume continues to decline and trading activities slow down. Then, the breaking point arrives and the trading activities change. It is more likely for the prices to drift laterally and saucer-out as they exit the precise boundary lines of the falling wedge pattern before resuming the primary trend.

Figure 4 shows the short entry was made when the price broke the lower trendline at 786.0, on the close of the bar that broke the trendline. Trend lines drawn above and below a price chart pattern can converge https://xcritical.com/ to help a trader or analyst anticipate breakout reversals. While the price can break out of either trend line , the wedge pattern has a tendency to break out from the trend line in the opposite direction.

Is Your Risk/Reward Enough?


Look for a rising wedge indicating a bearish reversal during a clear uptrend movement. The highs are getting lower and lower, and the lows are climbing high over the chart. The result is that the price appears to be squeezed between two narrowing ascending channels.

The lines show that the highs and the lows are either rising or falling at differing rates, giving the appearance of a wedge as the lines approach a convergence. Wedge shaped trend lines are considered useful indicators of a potential reversal in price action by technical analysts. Out of all the chart patterns that exist in a bullish market, the falling wedge is an important pattern for new traders.

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Traders would then recommend not to buy on either end of the candlesticks that break out. Instead, wait until further candlesticks occur supporting what is a falling wedge pattern your trading thesis before making a move to open a trade. It just represents a pattern within a pattern of the overall uptrend. falling wedge bullish or bearish
A Symmetrical Triangle is characterised by two intersecting trend lines connecting successive highs and lows. Unlike a wedge, the slope of the trend lines is close to equal , which is one of the primary differences. As previously mentioned, trial and error is necessary to confirm these patterns. The most crucial aspect is connecting the swing highs/lows on the trend lines.

Descending triangle vs. falling wedge


You should place your stop loss at the nearest high on the sloping trend line. Reading classic chart patterns is merely one part of a broader trading strategy, which you can use to your advantage as long as you don’t rely on it alone. A sound trading strategy would also require you to determine the right entry and exit points in your trade. If coupled with other indicators and used the right way, it can bring massive profits especially if you’re in the crypto market where gains are orders of magnitude higher than others. Ascending Triangle An ascending triangle is a bullish pattern which signifies the continuation of an uptrend, hence “ascending” triangle. However, the most important thing is to find the right pattern from the perfect location.

Falling Wedge Pattern


That being said, many traders would consider it safe to include multiple points before declaring it a pattern inside the two converging trend lines. Finally, you have to set your take profit order, which is calculated by measuring the distance between the two converging lines when the pattern is formed. This way we got the green vertical line, which is then added to the point where the breakout occured. Thus, the other end of a trend line gives you the exact take-profit level.