What is Falling wedge Pattern and how to do trading with it?
The Falling wedge Pattern is a powerful bullish pattern which occurs in technical chart. Although it is a Bullish pattern, you can notice the occurring of the pattern in both upward and downward trend.
It indicates the reversal of the downward trend into bull run or the continuation of the current trend. It is not easy to identify, all it takes is few trend lines and consistent study of the charts to make the right opportunity for yourself to earn good profits.
How to Identify the Falling Wedge pattern?
Few things to remember while locating the falling wedge.
- The triangle which will form later will be smaller than the former.
- Draw the support level at the base of the triangle and resistance level at the peak of the triangle converging towards the single point known as apex.
- It should be accompanied by the declining volume
- It is very effective when accompanied by decreasing volume.
Where to take Entry?
When the price action breaks the pivot high near the apex point, the closing of the breakout candle will be the entry point. The price can come back for a re-test till the support level and bounces back that will be another entry point for you.
Where to put stoploss and target in Falling wedge?
Stoploss – You can add the stoploss at the opening of the breakout candle. You can use trailing stoploss to maximize your profit.
Target – There is no specific target in this pattern, most traders enjoy the profit by applying trailing stoploss. The limitation for the target will be last three resistance level which was formed before by the price action.
Key Takeaways
- Falling Wedge Pattern appears in all time frames.
- Traders use this to identify the reversal of the downtrend or continuation of the current trend.
- The Falling Wedge (Descending wedge) is a technical chart pattern used to identify the opportunity to earn profits in stock market. The Falling wedge also indicates the continuation of the current trend.