A price action trader or professional investor cannot help but know rising wedge pattern. It can be said that this is a model that brings high usage value among Price patterns forex and is extremely useful in trading. Furthermore, for experienced Forex “strategists”, using this model in combination with other tools is even more “advantageous”. Through this article on Forex Trading, let’s learn more about this interesting model!
Introduction to the wedge pattern in Forex
Below is information about the concept and properties of the model that you need to know.
General concept and role of the rising wedge pattern
As the name suggests, the wedge pattern has a gradually narrowing display similar to a wedge. When the two support and resistance lines slope up and converge at a point angled up from the body, a rising wedge will appear. For the model to be complete, the price line needs to touch the Trendline line at least twice. This means that on The rising wedge pattern, we will have 4 clear intersection points.
A rising wedge will typically appear during an uptrend, with prices at subsequent peaks higher than previous peaks. However, the slope of the following peaks compared to the previous peaks is lower than the slope of the following bottoms compared to the previous bottoms. In other words, the resistance line has a lower slope than the support line.
Advantages and disadvantages of the rising wedge trading strategy
Advantage:
- Easy to recognize for experienced traders.
- Often seen appearing in the financial market so it will be relatively useful
- Easily define stop loss and take profit levels.
- Brings attractive profit rates, suggesting a good time to invest.
Defect:
- Can be difficult for beginners to trade.
- Often misidentified.
- Need additional confirmation from technical indicators or other oscillators.
Some popular rising wedge strategies
The rising wedge pattern is used quite a lot in Forex trading. That’s why this model is applied to many different strategies. However, within the scope of this article, let’s explore the most basic strategies!
Strategy for applying the model in a trend reversal
When the uptrend ends and the price forms a rising wedge, this is a signal that the price is likely to reverse to the downside. We should wait for the bearish candlestick to break the support line to find a selling opportunity.
Many investors decide to sell as soon as the candle closes below the support line. But in reality, this can be risky due to the possibility of false signals appearing. To be safer, investors should wait for the price to rebound to test the support that has just been broken and combine it with other reversal signs from candlesticks or trend indicators to determine a safer and more optimal selling point. .
The price target will be the old bottom areas in the wedge pattern.
The stop loss should be placed at the most recent high of the wedge pattern.
Trend reversal strategy when trading
This strategy appears in wedge patterns during rallies of downtrends or during corrections of uptrends. Like trend reversal strategies, buy or sell points appear when support and resistance levels are broken. However, this trend continuation strategy is less commonly used.
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General way to trade with the wedge pattern
Rising Wedge or falling wedge will have the same implementation method. Because they are all part of the Forex model wedge pattern classification. Here are some instructions to help you trade with this model more effectively:
Step 1: Determine the entry point.
There are two ways to determine the entry point. Please consider and choose the most suitable method for you.
– Method 1: Execute the order right when the price starts to break out
Specifically, you enter an order when the price breaks the resistance level with the falling wedge pattern or breaks the support level with the rising wedge pattern.
– Method 2: Wait for the confirmation candle to appear after the breakout candle, then enter an order at the closing price of this confirmation candle.
With a rising wedge, the confirmation candle will be a bearish candle. Conversely, with the falling wedge pattern, the confirmation candle will be a bullish candle.
This method is suitable for new traders. Although the profit is not as high as method 1, it is safer and less risky.
Note: In the process of implementing a trading strategy, you should not only depend on the wedge model but should combine it. It will help confirm reversal signals more effectively. These tools can include: technical indicators, candlestick reversal patterns…
Step 2: Perform analysis to start determining the correct take profit and stop loss points
– Stop loss: You can place a stop loss order above the highest peak for the rising wedge. Or you can even place it below the nearest bottom for a falling wedge pattern.
– Take profit: If the model works correctly, the price will increase or decrease by at least the width of the wedge. From that, it can be deduced that the breakout point equal to the wedge width will be the ideal profit-taking point.
Conclude
Above are some of the most general generalizations about The Rising Wedge pattern that Forex Trading compiled. Hopefully, this will be a good source of knowledge and support for investors. In summary, it can be affirmed that this model is useful, effective, and at the same time very complex. So my advice is to research carefully before starting. Don’t forget to follow our next articles to accumulate knowledge for yourself!
FAQ
What is the objective of the rising wedge pattern?
The target this pattern is aiming for is equal to the wedge height distance. Normally, when a rising wedge appears in a downtrend, it will be a sign of the next downtrend. This reduction will be equal to the existing wedge height.
Another name for the rising wedge?
A bearish chart pattern (bearish chart pattern) is also known as a rising wedge. This name is based on the values and role of the wedge pattern
What should you keep in mind when trading with the wedge pattern in forex in general?
- When the price has not passed the breaking point, absolutely do not enter an order
- Absolutely follow the direction on the breakout candle. Combine other tools to specifically analyze the strategy or better only use it when you have trading experience.
