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Trending patterns like the NZD/USD’s Rising Wedge can be traded one of three ways and it all depends upon the strength of the (up)trend.

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The daily NZD/USD has rallied through the uptrend line resistance of the pattern triggering a contnuation breakout entry long.
Chart pattern alert courtesy of Autochartist.

The first way – and this is my preference as well – is to enter a trending market and this of course includes a trending pattern occurring in a trending market phase on a correction. This means a pullback to support in an uptrend and a bounce to resistance in a downtrend.This is swing trading and a trend following strategy.

The second way – and this is a trend-following method too – to enter on a breakout of the existing trend or an acceleration of the existing trend. That’s the case in this example of the NZD/USD.

The last is the reversal entry because after-all price action does reverse. I will consider two types of reversals: The PATTERN reversal and the TREND reversal. One can happen without the other. I will gauge the pattern reversal by the pattern – that’s obvious right? I will gauge the trend reversal using my 34EMA Wave. Notice that in this example the 34EMA Wave has been decent support – not great – but the angle is up – but not great – so while I am going to follow the trend I will also be wary that this is NOT THE CLEAREST BULLISH PSYCHOLOGY right now.

In fact, look at the Autochartist Initial Trend reading. It’s another way to confirm market trends and it is also saying (with just the four-bar reading) that the trend is not strong nor exceptionally clear but the momentum is UP so follow it but stay nimble.

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This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.