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Chapter 14, Part IV. Wedge pattern.

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Jul 7, 2011.

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  1. Administrator

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    Part IV. Wedge pattern. [​IMG]
    Commander in Pips: Today we will talk about Wedge pattern. I think it will make you happy that this pattern is much simpler than previous ones – both to trade, and to understand.

    Pipruit: Oh, thank you, Sir, because I just don’t know where I can totally figure out with previous ones.​

    [​IMG]

    Commander in Pips: You’re welcome. So, a Wedge pattern could be viewed in a couple of shapes – as a rising and as a falling one. The form of the pattern itself is the same, but it could have different direction – upward or downward.

    In the classical approach to technical analysis, wedges are usually treated as a reversal pattern, or at least as pattern that could lead to significant retracement in the opposite direction. When we will discuss the market mechanics of the wedge – you will understand why this works in that way. If a wedge forms on long-term charts, such as monthly, it even could warn us about a long-term reversal possibility.

    But currently it is better to treat wedges mostly as indecision patterns, although it more gravitates toward reversal nature than to continuation nature. In fact a wedge would remain as a reversal pattern but this indecisiveness quality comes from the current tricky market environment and the wishes of market makers to punish the public. Market makers know that the public knows the classical explanation of wedge patterns, and that the public treats wedges as reversal patterns. So, the public will enter the market accordingly with predictable placement of stops. Market makers very often force wedges to fail at least temporally to grab public stops and then release them, so that wedges then show their natural price action. In the modern trading environment, pattern failure or fake breakouts are as common as normal price action itself. Keep this in mind this, and be as cunning as a fox.

    [​IMG]
     
    #1 Administrator, Jul 7, 2011
    Lasted edited by : Mar 27, 2016
    Hamza Samiullah likes this.
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