Wedges are a chart pattern that can indicate a move up or down from the area of the current wedge pattern. The direction of the move depends on whether the wedge is rising or falling.
A rising wedge
A rising wedge forms when the lows of the chart pattern are moving higher but the highs of the pattern aren’t moving up as fast. This leads to a wedge pattern that points upwards
When a rising wedge occurs it is usually seen as a signal that the currency pair is ready to move downwards. This is regardless of whether the pair is currently in an uptrend or downtrend so a rising wedge can be a reversal pattern during an uptrend or a continuation pattern during a downtrend.
A falling wedge
A falling wedge is the opposite of the rising wedge and the peaks of the pattern are formed lower at a much faster rate than the lows of the pattern.
A falling wedge is a signal that the pair is about to move upwards.
Typically an entry order is set above or below the trendline (depending on whether it is a falling or rising wedge) in the direction the pair is expected to break with a target set to take profits at around the same distance that the wedge fell or rose.
