![]() In the chart below, you can see how the rising wedge pattern looks in a bullish long trend. However, in some cases, you’ll see that this pattern can also be used to identify a correction in a trend and thus, the continuation of the primary trend in the market. Generally, the rising wedge pattern always indicates a reversal in currency pair prices. Then, whenever you identify a rising wedge pattern near one of the Fibonacci levels, you can take it as a strong indication for reversal rather than correction. The best of all would be to draw Fibonacci support and resistance levels. To identify reversal, you will have to wait for at least one candlestick to be completed after the trend line breakout and confirm the trend reversal with other technical indicators.įor that matter, some of the most useful trend reversal indicators include the Relative Strength Index indicator, moving averages, and the MACD (Moving Average Convergence Divergence). In most cases, the rising wedge pattern occurs at the end of an uptrend and signals that the buying pressure is not likely to continue. With that in mind, let’s see how these different rising wedge formations look on charts. This makes rising wedges among the most reliable patterns in technical analysis but also among the most complicated trading strategies you can find in forex trading. However, the confusion with the rising wedge pattern is that it is difficult to accurately determine whether it is a continuation or trend reversal. ![]() ![]() This signals a slowing trend and a price trend reversal. How to Trade Forex Using the Rising Wedge Pattern – Strategies and ExamplesĪs we mentioned, the rising wedge pattern can be identified when the price consolidates and the trend lines narrow and become closely aligned. Set a stop-loss order at the same support trend line.Place a sell order once the rising wedge appears and the price break below the support line.Wait for a price consolidation and the contraction of support and resistance lines.Draw support and resistance two trend lines along with the highs and lows of the trend.Identify an existing trend in a currency pair.To make things clear and organized, you are advised to follow the steps below in order to identify and use the rising wedge bearish reversal pattern in forex trading. 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. The rising wedge is a pure price consolidation pattern that appears at the end of an uptrend. A common stop level is just outside the wedge on the opposite side of the breakout.How to Identify and Use the Rising Wedge Pattern in Forex Trading? The target can be estimated through the technique of measuring the height of the back of the wedge and extending it in the direction of the breakout. These wedges tend to break upwards.Ĭonservative traders may look for additional confirmation of price continuing in the direction of the breakout. In other words: the highs are falling faster than the lows. The second is Falling wedges where price is contained by 2 descending trend lines that converge because the upper trend line is steeper than the lower trend line. In other words: the lows are climbing faster than the highs. The first is rising wedges where price is contained by 2 ascending trend lines that converge because the lower trend line is steeper than the upper trend line. There are 2 types of wedges indicating price is in consolidation. The Wedge pattern can either be a continuation pattern or a reversal pattern, depending on the type of wedge and the preceding trend.
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