Apart from falling wedges, there is also a rising wedge pattern. What is the rising wedge pattern, and how do you read it? Come on, see the full review below!
What is the Rising Wedge Pattern?
The rising wedge pattern is a reversal pattern that can provide clues to traders regarding the direction and distance of further price movements.
Traders prefer this one pattern because it is easy to identify it.
This pattern is formed when the price consolidates between upward-sloping support and resistance lines.
In this case, the slope of the support slope line is steeper than the resistance slope.
This slope could indicate higher lows forming more quickly than higher highs leading to a wedge-like formation.
Also note this pattern is often interpreted as a bearish condition. This pattern has the potential to become a continuous bearish reversal and bearish pattern.
As a reversal pattern, the rising edge will slope upwards and follow the existing trend, whereas the rising wedge will still go up as a continuation pattern. Still, the slope will be against the prevailing downtrend.
Rising Wedge Criteria
Here are some criteria for the rising wedge pattern that you need to know and understand:
- Usually, this pattern is marked by a converging trend line for 10 to 50 trading periods
- The rising wedge can be viewed as an ascending or descending wedge, depending on the direction
- The increasing wedge will have a good track record of being able to forecast price reversals
- When the breakout is in the opposite direction of the rising wedge and the steeper the slice, the more accurate the signal will be
Example of the Rising Wedge Pattern
The rising wedge is a technical indicator that can indicate a reversal pattern and is often seen in bear markets.
This pattern appears on the chart when the price rises, with the pivot low and high that converge towards a point called the “apex.”
Convergence will be evident at the top right of the chart by passing two trendlines, one crossing two or more pivot highs and the other connecting two or more pivot lows.
Examples are as follows:
Types of Rising Wedges
There are two types of the rising wedge that you need to know, with the following explanation.
1. Reversal Pattern
This pattern is formed by sloping upwards and follows the prevailing or bullish trend.
2. Continuation pattern
This is a continuation pattern formed when the price trend is in a bearish condition that will continue to rise, but the slope will be against the prevailing downtrend.
Apart from the two types of patterns above, there are also several other types of the rising wedge, namely:
- Breakout: occurs when the security’s price has increased periodically, but can also occur during a downward trend
- Bullish: this pattern can occur when the trend is making its last downward move if the price has been falling periodically.
- Rising Flag: looks like a flag and a pole. This pattern is formed when rising prices go through a period of consolidation and prices move in a narrow range defined by parallel lines.
- Target: is a general trading strategy that can be adjusted based on how far the price can go or reach the target according to the trader after the breakout
How to Read the Rising Wedge Pattern
To read this one pattern, traders can eliminate all types of wedges in a sideways trading environment.
The pattern can be positive in a downtrend due to price action correcting higher or in an uptrend.
The value that moves smaller until a certain point will create a third pattern in a series of lower positions.
Traders will also start to increase the price and trigger this pattern.
Then, there will be a breakdown because buyers cannot take advantage of this positive momentum.
Then, this pattern will also be a little narrower because the two trend lines will meet relatively quickly.
Pros of the Rising Wedge Pattern
The main advantage of the rising wedge pattern lies in its ability to warn traders about an imminent change in trend direction.
Although the wedge caught the price action moving higher, the consolidation of energy indicates that a breakout is imminent.
The rising wedge is a popular reversal pattern in the crypto investment world. This pattern can provide clues to traders regarding the direction and distance of the next price movement.
Liked by traders because it is straightforward to identify, this pattern consists of 2 types: Reversal and Continuation patterns.
Do you already understand the Rising Wedge Pattern and how to read it?
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