Wait for a price consolidation and the contraction of support and resistance lines.Draw two trend lines – the bottom support line and upper resistance line.Identify an existing downward trend or a long bullish trend in a currency pair.Taking the above into consideration, there are several steps you need to follow in order to identify and use the falling wedge pattern: As you can see, the falling wedge pattern is formed at the end of the downtrend with three lower highs and two lower lows, and most importantly, a price consolidation at the end of the downward trend.Īs soon as the price breaks above the resistance trend line, an entry point is signaled and the trader will take a long buying position. Then, you need to identify two lower highs and two (or three) lower lows.įor example, let’s take a look at the USD/JPY 30-min chart. To identify a falling wedge pattern, the first thing you need to find is a price consolidation after a downward trend. How to Identify and Use the Falling Wedge Pattern? When the falling wedge breakout indeed occurs, there’s a buying opportunity and a sign of a potential trend reversal. Traders often interpret the pattern as a slowing momentum indicator and a price consolidation mode. Regardless, the falling wedge pattern, much like the rising wedge pattern, is a useful chart pattern that occurs frequently in any financial instrument and in any timeframe. In the vast majority of cases, the pattern appears after a downtrend and is considered a trend reversal pattern, however, in some cases, it can also be found within a trend and can be interpreted as a continuation pattern. The falling wedge pattern is a bullish trend reversal chart pattern that signals the end of the previous trend and the beginning of an upward trend. The falling wedge pattern – Pros and cons.How to trade the falling wedge pattern?.How to identify and use the falling wedge pattern?.
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