The Rising Wedge and Falling Wedge are chart patterns that often indicate a trend reversal. They form when price movement narrows over time, creating a wedge-like shape.
Rising Wedge
- Appearance: Price makes higher highs and higher lows, but the slope of the highs is slower than the slope of the lows, causing the pattern to narrow
- Trend Context: Often appears after an uptrend
- Signal: Usually bearish reversal
Psychology:
- Buyers are still pushing price up, but momentum is weakening
- Sellers slowly step in, leading to a breakdown below support
How to Trade:
- Entry: After breakdown below lower trendline
- Stop Loss: Above recent swing high
- Target: Height of the wedge projected downward
Falling Wedge
- Appearance: Price makes lower highs and lower lows, but the slope of the lows is slower than the slope of the highs, narrowing into a wedge
- Trend Context: Often appears after a downtrend
- Signal: Usually bullish reversal
Psychology:
- Sellers are still pushing price down, but momentum is weakening
- Buyers gradually take control, leading to a breakout above resistance
How to Trade:
- Entry: After breakout above upper trendline
- Stop Loss: Below recent swing low
- Target: Height of the wedge projected upward
Key Tips for Wedges
- Works better on 4H or Daily charts for reliability
- Always confirm with volume (should increase on breakout)
- Can occasionally act as continuation patterns — check trend context
- Avoid entering inside the wedge — wait for breakout and retest if possible