WEDGE
The Wedge is a widely recognized chart pattern that signals either a continuation or reversal of a prior trend, based on the direction of its body. This pattern appears similar to a consolidation phase, characterized by converging trend lines following a significant trend movement. Unlike the Flag pattern, the Wedge does not include a Flagpole and is not contingent on the trend direction preceding it. The crucial element is the direction of the pattern's body, which determines whether it is bullish or bearish.
How Wedge works
The bullish and bearish versions of the Wedge pattern
A Wedge with a declining body indicates a bullish pattern, whereas a Wedge with an ascending body signals a bearish pattern. The pattern becomes effective when the price breaks above the upper boundary of a bullish Wedge or below the lower boundary of a bearish Wedge. This breakout line is essential to the pattern's significance. The Wedge pattern is rooted in trends and trend corrections, which occur in every asset movement across all timeframes. This universality allows traders to utilize it in various strategies and timeframes.
Identifying Wedge
Traders can detect Wedge pattern formation in two cases:
○Trend correction. In this case, the Wedge will become a continuation pattern
○End of a trend. In this case, the Wedge will become a reversal pattern.
A real-chart example of a bearish Wedge
A real-chart example of a bullish Wedge
Trading examples
Bullish Wedge
A real-chart example of a bullish Wedge
1. Once the pattern is formed, look for an upper-side breakout.
2. After the breakout, open a Buy order with a Stop Loss below the last minimum.
3. Ensure your Stop Loss is less than 5% of your total deposit to calculate how much you should invest in this position.
4. Place Take Profit on a distance equal to the height of the beginning of pattern formation
Bearish Wedge
A real-chart example of a bearish Wedge
1. Once the pattern is formed, look for a lower-side breakout.
2. After the breakout, open a Sell order with a Stop Loss above the last maximum.
3. Ensure your Stop Loss is less than 5% of your total deposit to calculate how much you should invest in this position.
4. Place Take Profit on a distance equal to the height of the beginning of pattern formation
* Not trading advice. Consider your risks before making a decision
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