The wedge pattern, which is unique in the sense that it can be viewed as either a reversal pattern or a continuation pattern, depending on the shape of the pattern and whether it is located in an uptrend or a downtrend.
The rising wedge pattern is characterized by a pattern which forms when the market makes higher highs and higher lows with a contracting range. When you find this pattern in an uptrend it is considered a reversal pattern as the contraction of the range indicates that the uptrend is loosing steam. When you find this pattern in a downtrend it is considered a bearish pattern as the market range becomes narrower into the correction indicating that it is running out of steam and the resumption of the downtrend is in the making.
Type:-
1. The Rising Wedge Reversal Pattern
2. The Rising Wedge Continuation Pattern (look chart)
When a rising wedge appears in a down trend in the forex market, it is considered a continuation pattern. As this is the case when traders see this pattern occur in a downtrend they will commonly look to trade the continuation of that downtrend by looking for selling opportunities on the break of the lower support line.
The target for the trade is then calculated by measuring the distance from the lowest trough on the pattern to the highest peak, projected downward from the breakpoint.
Lastly, the stop loss for this strategy is then placed just above the outside of the wedge pattern.
Personally, i would like to see Divergence as support sign; as higher highs & higher lows is strongly suggest uptrend.. When i see divergence + rising wedge pattern; indicating that price is running out of steam and the resumption of the downtrend is in the making ..
2 comments:
Ok,
do you realize you said the rising wedge in a downtrend is a BULLISH pattern, then went on to say it is because the market is running out of steam and the down trend is about to resume? Right after saying the rising wedge is a reversal pattern in an uptrend is a reversal pattern because the market is running out of steam? And do you realize you're the fourth person I've found on the web who has done this? Why can't people keep bullish and bearish right? Unless I'm missing something here you said the rising wedge is a downtrend pattern in both instances, right after stating in the first sentence the rising wedge is sometimes a continuation and sometimes a reversal pattern. And everyone is doing this.
Thank.. ur right... i've correct the statement... BTW honestly speaking, i don't like to trade this pattern. At the moment, im just concentrate on HNS, DT, DB and Triangles. TQ for visiting my blog and give a good comment.
Post a Comment