This article has been translated from English to Gen Z Slang.
In a Wedge chart pattern, two trend lines converge.
It means the vibe of price movement in the Wedge pattern is cooling off.
Wedges give us a pause in the current trend.
When you spot this setup, it’s like forex traders are low-key stuck on deciding the next move.
A Falling Wedge is a bullish chart pattern that happens in an upward trend, with lines sloping down.
A Rising Wedge is a bearish chart pattern that’s spotted in a downward trend, with lines sloping up.
Wedges can be either continuation or reversal vibes.
Rising Wedge
A rising wedge pops up when the price chills between upward-sloping support and resistance lines.
Here, the support line is flexing harder than the resistance.This hints that higher lows are forming quicker than higher highs. This gives the wedge its signature look, hence the name!
With prices vibing together, a major move is brewing, so a breakout either up or down is on the horizon.
If the rising wedge shows up after an uptrend, it’s usually a bearish reversal pattern.
But if it happens during a downtrend, it might hint at the down move sticking around.Either way, when you peep this forex trading chart pattern, you gotta be ready with your entry orders!
In this first example, a rising wedge popped at the end of an uptrend.
Peep how price action is forming new highs but at a much slower pace than when price makes higher lows.
See how the price dipped? That means there are more forex peeps on a mission to short than go long!
They pushed the price to break the trend line, hinting at a possible downtrend.
Just like the other chart patterns we went over, the price move after the breakout is pretty much the same size as the height of the formation.
Now let’s peep another example of a rising wedge formation. This time, it’s a bearish continuation signal.
As you can see, the price came from a downtrend before chilling and sketching higher highs and even higher lows.
In this case, the price dipped and the downtrend kept doing its thing. That’s why it's a continuation signal, fam!
See how the price made a slick move down that’s as tall as the wedge?
What did we vibe about these Japanese candlestick chart patterns?A rising wedge after an uptrend generally flips the script to a REVERSAL (downtrend) while a rising wedge in a downtrend usually means CONTINUATION (downtrend).
Long story short, a rising wedge = downtrend, aka, a bearish chart pattern!
Falling Wedge
Just like the rising wedge, the falling wedge can vibe as either a reversal or continuation signal.
As a reversal signal, it chills at the bottom of a downtrend, hinting that an uptrend is incoming.
As a continuation signal, it flexes during an uptrend, suggesting the upward motion will keep going. Unlike the rising wedge, the falling wedge is a bullish chart pattern.
In this example, the falling wedge is a reversal signal. After a downtrend, the price made lower highs and lower lows.
Notice how the falling trend line hooking up the highs is steeper than the line connecting the lows.
Once it busted out above the wedge, the pair made a slick upward move equal to the height of the formation. This time, the rally went a few more pips past that target!
Let's check an example where the falling wedge is a continuation signal.
Like we said before, when a falling wedge forms during an uptrend, it usually signals the trend will pick up again.
Here, the price took a breather after a strong rally. Buyers might’ve just taken a chill pill before rallying more peeps to join the bull squad.
Hmm, looks like the pair is gearing up for a strong move. Which way will it go?
See how the price broke to the top side and kept climbing?
If we placed an entry order above that falling trend line connecting the pair’s highs, we would've been on that strong uptrend and bagged some pips!A solid upside target would be the height of the wedge formation.
If you’re hungry for more pips, you can secure some profits at the target by closing part of your position, then letting the rest ride the wave.