Price movement is contained and alternates between the two non-parallel trend-lines. When prices break through the lower trend-line they will tend to drop quickly. The two sloping trend lines are the most obvious thing you will notice the upper one will have a slightly steeper slope than the lower one and the trend lines will then spread out over time while both slope upward. Once the decline begins prices will most often decline to, or below, the start of the formation. Thomas Bulkowski’s Encyclopedia Of Chart Patterns notes the failure rate for this pattern formation is 24%, however only 6% where a downside break occurs, suggests that once the downside break happens there is a possibility that a price recovery and a continued decline should be expected. The patterns are very trustworthy once a downside break happens, however they are less reliable prior to the break of the lower trend-line. The ascending broadening wedge formations volume is likely to increase ever so slightly as the breakout advances. The upper trend line of an ascending broadening wedge goes upward at a higher rate than the lower one, thus creating an apparent broadening appearance. While symmetrical broadening formations have a price pattern that revolves about a horizontal price axis, the ascending broadening wedge differs from a rising wedge as the axis rises. The rising wedge pattern is a bearish pattern, whether it forms after an established uptrend or during a downtrend, so the next time you spot this pattern on your favorite market exercise caution if you are holding a long position or prepare for an opportunity to get short.The formation, ascending broadening wedge is called this because of its similarity to a rising wedge formation and then has a broadening price pattern. A target could again have been placed at the level where the rising wedge started from with a stop loss above the last higher high.Īlways make sure that your potential reward is larger than the risk you are taking on and if your stop loss ends up being too far away, then consider placing your stop above a previous swing high that was formed on the way down, before the support line was broken. This is also a picture-perfect example where price pulled back to the support line, retested it from below and dropped lower. My final chart shows that same multi-year rising wedge that formed in AUD/USD but note that although price made higher highs that the momentum between each peak started slowing down, which is a behavior that these patterns tend to display. Traders Tip: When you are following a rising wedge in real-time, it can be a good idea to watch for momentum divergence on a MACD-Histogram between the higher highs, and use it as an additional confirmation method that a rising wedge might be nearing an end. The ideal place to set a target will be at the lower level where the rising wedge started from, with a stop loss a few pips above the final high before the breakout occurred. Just keep in mind though, that this may not always happen and result in a trader missing an entry. Conservative traders, on the other hand, will generally wait for price to retest the lower support line from below before they will execute a short trade. Since the rising wedge is a bearish pattern, aggressive traders will typically wait for price to break below the lower support line before they will execute a short position. Practice This Strategy How to Trade the Rising Wedge Pattern
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