stephenleachman

WEDGE PATTERN ( TREND REVERSAL)

FX:EURJPY   Euro Fx/Japanese Yen
112 1 16
Wedges are both trend reversal and continuation patterns. One can define
the different by knowing that a rising wedge in a up trend is a sign of a reversal
whereas a rising wedge in a downtrend is considered as a type of retracementand
you want to be looking to trade back into the direction of the trend (see attachment)
This is also the same for descending wedges. a descending wedge in a downtrend is
the reversal sign and in a up trend is a retracement. The reversal wedge patterns
are signs of a trend losing strength. The pattern pushes into a new highs or lows
but with momentum slowing forming the wedge pattern. once price breaks the
wedge and prior high or low confirming the reversol, I preferably always wait for
a pullback to the breakout of a fib level trading this pattern. Target is the Distance
Between The Mouth of the wedge Added To The Breakout.

Conventional Way To Terad The Wedge Reversal:

snapshot

-----Ascending Wedge Bearish Reversal-----
(1) Wait for a clear Ascending Wedge to form.
(2) Wait for price to break and close below previous low - swing low.
(3) Sell pullback at breakout level.
(4) Stop above the 50% retracement of top of wedge to breakout. (Can also Use Wedge High)
(5) Target Is the Distance Between The Mouth of the wedge Added To The Breakout.

-----Descending Wedge Bullish Reversal-----
(1) Wait for a clear Descending Wedge to form.
(2) Wait for price to break and close Above previous high.
(3) Buy pullback at Breakout.
(4) Stop below the 50% retracement of breakout to bottom of wedge. (Can also Use Wedge Low)
(5) Target Is the Distance Between The Mouth of the wedge Added To The Breakout.
Ronnee
5 months ago
Heh, thanks Stephen...will help me no end...cheers Ron NZ
Reply
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