Good day everyone.
Today I'll be discussing the falling wedge pattern.
How it looks, builds up, and plays out.
1.DEFINITION
First of all, What is an falling wedge?
The falling wedge pattern is a continuation pattern formed when price bounces between two downward sloping, converging trendlines . It is considered a bullish chart formation but can indicate both reversal and continuation patterns – depending on where it appears in the trend.
2. ENTRY (TRIGGER ENTRY SIGNAL)
In falling wedge pattern , you are to trade the breakout or catch the move early at the support. In the ascending triangle pattern, there are two entry types:
- Conservative: This is a conservative form of entry which implies buying the breakout above the falling wedge's resistance. This is the safest form of entry.
- Aggressive: This is an aggressive form of entry which implies buying at the test of the falling wedge's support. This is most profitable form of entry if the trade plays out as expected.
3. TARGET (TAKE PROFIT)
Here, I'll be discussing on your profit target levels in the case of an falling wedge pattern .
Basically your take profit levels should be where there's a high concentration of sellers such as resistance levels.
4. STOP LOSS AND SETUP INVALIDATION
Stop loss is simply a level where you cut your losses when you're currently in a trade. It's like a breathing space for your trade. Your stop losses shouldn't be too tight ( to avoid being hit by stop loss hunting or market noise). It shouldn't be too far also (to give you a good risk to reward ratio (R:R)).
Setup invalidation on the other hand is a pre trade condition. It checks the validity of your setup before your trade. It's the last point that keeps a trade setup valid. When broken, the setup is invalidated ( no longer useful, you'll need to run another analysis).
Setup invalidation and stop loss in a falling wedge pattern is usually a breakdown below the falling wedge's support or the previous swing low.
Note: Your stop loss can be less or equal to your setup invalidation, but not greater.
5. TRADE EXAMPLE
I'll be using my analysis on FRONT/BUSD as example of an falling wedge pattern .
- Trade entry (buy order ⬆️): aggressive entry at the test of the falling wedge's support.
- Target (take profits levels 🎯): horizontal resistance levels.
- Setup invalidation and stop loss: breakdown below the falling wedge's support.
Price brokeout as expected from my previous analysis and hit my targets.
That's that for the falling wedge pattern. I'll be discussing the fibonacci tools in my next educational review.
Thank you.
Today I'll be discussing the falling wedge pattern.
How it looks, builds up, and plays out.
1.DEFINITION
First of all, What is an falling wedge?
The falling wedge pattern is a continuation pattern formed when price bounces between two downward sloping, converging trendlines . It is considered a bullish chart formation but can indicate both reversal and continuation patterns – depending on where it appears in the trend.
2. ENTRY (TRIGGER ENTRY SIGNAL)
In falling wedge pattern , you are to trade the breakout or catch the move early at the support. In the ascending triangle pattern, there are two entry types:
- Conservative: This is a conservative form of entry which implies buying the breakout above the falling wedge's resistance. This is the safest form of entry.
- Aggressive: This is an aggressive form of entry which implies buying at the test of the falling wedge's support. This is most profitable form of entry if the trade plays out as expected.
3. TARGET (TAKE PROFIT)
Here, I'll be discussing on your profit target levels in the case of an falling wedge pattern .
Basically your take profit levels should be where there's a high concentration of sellers such as resistance levels.
4. STOP LOSS AND SETUP INVALIDATION
Stop loss is simply a level where you cut your losses when you're currently in a trade. It's like a breathing space for your trade. Your stop losses shouldn't be too tight ( to avoid being hit by stop loss hunting or market noise). It shouldn't be too far also (to give you a good risk to reward ratio (R:R)).
Setup invalidation on the other hand is a pre trade condition. It checks the validity of your setup before your trade. It's the last point that keeps a trade setup valid. When broken, the setup is invalidated ( no longer useful, you'll need to run another analysis).
Setup invalidation and stop loss in a falling wedge pattern is usually a breakdown below the falling wedge's support or the previous swing low.
Note: Your stop loss can be less or equal to your setup invalidation, but not greater.
5. TRADE EXAMPLE
I'll be using my analysis on FRONT/BUSD as example of an falling wedge pattern .
- Trade entry (buy order ⬆️): aggressive entry at the test of the falling wedge's support.
- Target (take profits levels 🎯): horizontal resistance levels.
- Setup invalidation and stop loss: breakdown below the falling wedge's support.
Price brokeout as expected from my previous analysis and hit my targets.
That's that for the falling wedge pattern. I'll be discussing the fibonacci tools in my next educational review.
Thank you.
