How to trade wedge chart styles :
It’s easy to see the reason of being so common between traders. it’s because it’s easy to be determined, and therefore it contains an easy side of a “self-verifying prophecy”
How to trade wedge chart styles :
By looking at the wedge graph pattern, It’s easy to see the reason of being so common between traders. it’s because it’s easy to be determined, and therefore it contains a easy side of “ a self-verifying prophecy ” . the fact that it also has a simple built-in measuring tool is very useful, because it’s very easy to use as a tool.
Definition of a wedge:
First thing we need to do it is to determine what is a wedge actually. the wedge is just two direction lines converge towards the top, in another meaning, the price is pushing according to the pressure of buying and selling . it looks like a triangle but it doesn’t converge in a horizontal way .in an other meaning, you might have an ascending trend line as usual, but in the top part of trading at the last few candles, sellers become more serious, so they push the market.
To get an idea about the shape of a wedge, take a look on the next graph:
On the graph, you can see the the New Zealand dollar has risen for a while, and it shows the ascending trend red line where there was a support in the last step to the top of the graph.
However, you can also see that the sellers become more severe somehow, as a result, the movement of the market is pressed upward. The raises were higher than it was before but it slowed down in terms of momentum. the two red lines show the shape that the wedge should be.
In this example , we see what is known as “the rising wedge”. The rising wedge shows the pressure in the rising direction and indicates an error . we lose some momentum , as a result , the risings are not so impressive as before . the beauty in this style is that the breakthrough down the ascending trend line indicates that we are on the way down the same style , which is indicated by the blue line . besides , the most important thing is that most of traders around the world will at least see that the direction line is being hacked . so even they were trading with the wedge styles, most of traders almost will notice the direction lines . when it get hacked , it gets the attention of everyone .
The stop loss is placed on the other side of the pattern , in this case the risk ratio to return 1:2 become easy . through the attention to the wedge , you notice that the market is running out of momentum , and the big reflection might happen .
Wedges can be progressive also :
like all the graphic patterns , there is the opposite as well .in this case, you are talking about the falling wedge . as you can see on the graph below , the American dollar has decreased against the Canadian dollar very sharply , then it drifted a little . you notice that the path of the dips was not so strong as it used to be before , and of course , the high levels become strong as well .
while you are drowing the two direction lines , you can see that the wedge is forming for sure . after that , we got to the blue line which represents the top of the wedge almost right at the breakthrough . the stop loss was on the other side of the wedge , which was also supported by the hammer that forms the last candle of the wedge right before the breakthrough .
if you look forward for several days , you can see that the same area provided support when backing down at least twice .
An other way to trad the charts
Wedges are just an other tool you can use it for charts trading . wedges are very commun , it also considered as a trend line breaks , so even if your competitor didn’t care about the wedges prospects, for sure they care about the direction lines because they are absolutely essentials. That’s why the wedges styles are very strong .