![]() The height of the back of the wedge should be measured. ![]() Target should be set in the following manner. Stop-loss should be fixed at the bottom price of the lower trend line. In figure 1, according to strategy 1, a trader should have taken a long position when the breakout had happened. One should wait for the closing of the security price to occur above the top trend line. Before taking a trade, one should make sure that it is not a false breakout. The first strategy suggests taking a long position when the price breaks the top side of the wedge. There are two strategies of trading using the falling wedge pattern. Taking a long position after spotting this pattern would also have given very good returns just in a very small period of time. This means the continuation of the existing trend. This pattern has been followed by an increase in prices. In this technical chart, it is clearly visible how a falling wedge pattern is being formed by the price movement of the currency pair. Hence, this also forms an opportunity to take long positions in the market. This shows the contraction of the markets temporarily. It is also formed when the price of the security makes lower highs and lower lows in comparison to the previous price movements in the given time period. When a falling wedge pattern is spotted in an uptrend on a chart, it signifies a continuation of the existing downtrend. It implies a continuation of the Existing Trend. Taking a long position after spotting this pattern would have given very good returns just in a very small period of time. This pattern has been followed by an uptrend. This can be seen in the below picture taken from currency markets: Hence, this forms an opportunity to take long positions in the market. ![]() This pattern is usually followed by a reversal in the downtrend to the upside. It is formed when the price of the security makes lower highs and lower lows in comparison to the previous price movements in the given time period. When a falling wedge pattern is spotted in a downtrend on a chart, it signifies a reversal in the existing uptrend. It implies a reversal of the Pattern and Beginning of the New Trend. The picture posted below shows all the aspects of a falling wedge pattern:ĭepending on the location of the falling wedge pattern on a chart, it can signify two things which have been discussed below: Falling Wedge Pattern in Downtrend: A breakout of price from the upper trend line. ![]()
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