A wedge is an additional chart pattern that indicates a rest from whatever the current trend is. These patterns can indicate both continuations and reversals of the current trend, so it is imperative that you are aware of what these patterns truly are.

A rising wedge occurs when a currency’s price is moving sideways, but the range it is trading in becomes smaller and smaller. The level of resistance, the high price, remains the same, while the level of support, the low price, begins to increase. This leaves a triangular wedge shape on the price chart. This is usually an indication that a bearish reversal is getting set to occur when this pattern occurs during a downtrend.

A falling wedge is the exact opposite of a rising wedge. Here, the support level changes slightly while the resistance level begins to drop in price. This is typically a signal that a bullish trend is about to occur. Finding a low point to enter a position is called for in this instance.

Wedges can be indicators that a trend is continuing itself as well. In these instances, a wedge will occur in the midst of whatever the trend is. So a rising wedge occurring in the middle of an uptrend is a signal that the price will continue to rise. A falling wedge that occurs in the midst of a downtrend means that the price will continue to drop.

Tags: how to trade chart patterns, rising wedges, Trading wedges