How to trade wedge patterns? An example based on EURUSD chart
Wedge Patterns are a type of chart pattern that is formed by converging two trend lines.
Wedge patterns can indicate both continuation of the trend as well as reversal.
Rising Wedge- On the left upper side of the chart, you can see a rising wedge.
Rising wedges usually form during an uptrend and it is denoted by the formation higher highs(HHs) and Higher Lows(HLs).
This pattern gives traders the opportunity to take short positions in the market.
When price breaks out of the lower Trend Line(TL) of the wedge, a trader can execute a short position.
Falling Wedge - On the left lower side of the chart, you can see a falling wedge.
Falling wedges when formed during a downtrend is a reversal pattern and it denoted by the formation of lower lows(LLs)
and lower highs(LHs).
If you notice this pattern during a downtrend, it usually indicates that the downtrend is losing momentum and buyers
are stepping into the market gradually.
When price breaks out of the upper TL, one can execute a buy trade.
On the right side, you can see the recent EUR/USD chart. The wedge pattern in this particular chart is the Broadening Wedge
Traders can trade this pattern by taking short positions whenever bearish price action takes place in the upper TL of the wedge.
On the other hand, buy trades can be executed on the lower trend line of the wedge.
Wedge patterns can indicate both continuation of the trend as well as reversal.
Rising Wedge- On the left upper side of the chart, you can see a rising wedge.
Rising wedges usually form during an uptrend and it is denoted by the formation higher highs(HHs) and Higher Lows(HLs).
This pattern gives traders the opportunity to take short positions in the market.
When price breaks out of the lower Trend Line(TL) of the wedge, a trader can execute a short position.
Falling Wedge - On the left lower side of the chart, you can see a falling wedge.
Falling wedges when formed during a downtrend is a reversal pattern and it denoted by the formation of lower lows(LLs)
and lower highs(LHs).
If you notice this pattern during a downtrend, it usually indicates that the downtrend is losing momentum and buyers
are stepping into the market gradually.
When price breaks out of the upper TL, one can execute a buy trade.
On the right side, you can see the recent EUR/USD chart. The wedge pattern in this particular chart is the Broadening Wedge
Traders can trade this pattern by taking short positions whenever bearish price action takes place in the upper TL of the wedge.
On the other hand, buy trades can be executed on the lower trend line of the wedge.