Wedge pattern
Also called: Rising wedge, Falling wedge, Ascending wedge, Descending wedge, Kama formasyonu, Takoz
A wedge is two lines sloping the same way and converging; it can show a trend losing speed and setting up to turn.
4 min read · one puzzle on the page
What does a wedge tell you?
In a wedge both lines slope the same way but close in on each other. In a rising wedge highs and lows both rise, but the lows rise faster, so price gets squeezed into a narrowing corridor. A falling wedge slopes down and narrows the same way.
What it shows is fatigue. In a rising wedge price still makes new highs, but each push is shorter than the last. Buyers keep going and cover less ground each time. That's why rising wedges usually resolve down and falling wedges usually resolve up.
The difference from triangles and channels is simple. In a channel the lines are parallel and the trend moves at a steady pace. In a triangle the lines slope in opposite directions, or one is flat. In a wedge both point the same way and converge.
How do you spot a wedge on a chart?
Watch the swings. In a rising wedge each new high clears the last by a few pips, but the rallies shrink: 40 pips, then 25, then 12. Pullbacks get shallower too. The lines through the highs and lows look like they'll meet somewhere ahead.
The wedge itself isn't the signal; the break is. In a rising wedge you're waiting for the lower line and the last higher low to break on a close. There's a cleaner sign too: price rallies once more, fails to beat the previous high, prints a lower high and then closes below the last low. At that point structure has turned.
This kind of turn often follows euphoria. Price rallies hard and accelerates, everyone wants on board, then the pushes shorten. The first lower high after an accelerating rally is the first concrete trace of fatigue on the chart.
The stop goes above the last lower high before the break. If price gets back there, the reversal idea is wrong. The wedge's absolute top is farther away, and parking the stop there makes 1R needlessly large. A falling wedge is the mirror image: the upper line and last high break on a close, and the stop sits below the last higher low.
Try it on a chart
No wedge is drawn with lines on this chart. What you get is its core: a rally losing steam, then a break in structure. Look at the pace of the rally, how the last high compares with the one before, and how the last low gives way.
At the end of a sharp, accelerating rally, price made a lower high and broke the last low on a close. What's your call?
No sign-up needed. Make your call; when the chart opens you'll see why.
Common wedge mistakes
Fading it before the break. Selling the top just because you see a rising wedge is betting against the trend. Until it breaks, a wedge is a rising market and can print a few more new highs.
Calling every slowing rally a wedge is just as common. Lines drawn without two highs and two lows show nothing. And some wedge-looking shapes are really flags or rising channels that carry on with the trend.
Then there's counting a wick as the break. A wick below the lower line changes nothing if the candle closes back inside. Wait for the close.
Last, entering late. If price broke the last low and dropped 30 pips fast, the distance to the last lower high has grown and 1R has ballooned. Waiting for a retest of the broken low beats chasing.
When do wedges fail?
With a strong news flow or a clear higher-timeframe trend, wedges often resolve with the trend. The rising wedge on your M5 chart may just be a small piece of a bull flag on H4.
Even after the break, price can climb back inside the wedge. That makes the break false, which is exactly what the stop is for. If the last lower high is taken out, get out rather than trying to rebuild the idea.
Textbook wedge targets usually point to where the wedge began. Price may get there or it may not. Set targets from a nearby structure level instead of marrying the book measurement.
Frequently asked questions
Is a rising wedge bullish or bearish?
Usually bearish. Price keeps making new highs, but each push gets shorter and buyers lose force. It's not a certainty, though: until the lower line and the last low break on a close, a rising wedge is still a rising market. For a short idea, wait for the break and put the stop above the last lower high before it.
What's the difference between a wedge and a triangle?
In a triangle the two lines slope in opposite directions, or one is flat; price coils toward a point and can break either way. In a wedge both lines slope the same way and converge. That's why a wedge shows a trend slowing rather than speeding up, and it usually resolves against its slope: rising wedges down, falling wedges up.
Where does the stop go on a falling wedge?
The long idea in a falling wedge comes when the upper line and the last lower high break on a close. The stop goes below the last higher low before the break; if price returns below it, the reversal idea is invalid. The wedge's lowest point looks safer but inflates the risk. If the distance is large, don't tighten the stop; trade smaller.
