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Chapter 14, Part IV. Wedge pattern. Page 6

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 21, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Rising wedge

    A rising wedge is formed when price stands between the upward sloping support and resistance lines. But now the support line is steeper than resistance, and hence higher lows are being formed faster than higher highs. Appearance of a rising wedge after an move up could become an early notification about reversal. Alternately, if rising wedge appears during move down – very probable that it will become a continuation pattern.

    Let’s add another chart that shows rising reversal wedge – just to show what it looks like. I will not show you rising continuation wedge, because it very similar to falling.

    Pipruit: Sure, no problem.​

    Chart #4 | AUD/USD Weekly
    [​IMG]
    Pipruit: I see, and why have you added MACD indicator?
    Commander in Pips: Because now we will turn to discussion how to trade a wedge and we will need it. Take a look at the same chart #1 but with tools that we will need to discussion of trading process.

    Some observations that may be will be useful to deal with wedges:

    1. Wedges with greater slope usually lead to stronger moves after breakout;

    2. A wedge is more reliable if the market shows true breakout after the 5th swing in the wedge body;

    3. If the market shows too long consolidation in wedge pattern – more than 5 swings, then the market could show a flat exit from the wedge – just sideways breakout;

    4. If the market during the 5th swing couldn’t reach an opposite border of the wedge and turns right back (look at chart #1) – this tells us about the direction of the breakout and that the breakout is near;

    5. MACD very often shows trend shifting in direction of a breakout ahead of breakout itself. This could be an early caution that a breakout is near;

    6. We have not yet studied such term as “Divergence”, but it very often appears when a wedge is forming.
     
    #1 Sive Morten, Dec 21, 2013
    Lasted edited by : Mar 27, 2016
    Hamza Samiullah likes this.
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