What is rising wedge and how to do trading with it?
The rising wedge pattern is a technical chart pattern, also known as ascending wedge. It is a bearish trend pattern indicating a reversal of price action seen in bear markets. It can be formed in both upward or Downward trend, with the Highs and lows concentrating towards a single point known as apex. The pattern shows strong indication when it is accompanied by the decreasing volume, it indicates the reversal of the upward trend or continuation of the current trend.
In this blog, we will go through how to identify the rising wedge pattern, how to do trade with it, where to add stoploss and how to make maximum profit out of it.
How to identify the pattern?
Things to remember while identifying the pattern.
- Draw a trend line along the base of every low and the peak of every High, now you have the Wedge ready on your chart pattern.
- The triangles forming in between the wedge till the apex are getting smaller, which indicates that the sellers are dominating the Buyers. This is a sign that the price will go down.
- Wait for the price breakout near the Apex point.
- There should be a decrease in volume at that point
When to take entry?
The closing of the candle which breaks the support level nearer to the apex point will be your entry zone. You can take the sell position. Sometimes the price will come back and do a Retesting at the support level (which turned into resistance level), so when the price bounces back from the support level, you can take another entry from that point.
Where to add stoploss?
You can add your stoploss at the high of the candle which touched the resistance before price breaks out of the support level.
Where to put the target?
The last three support level which was formed by the price action before forming the rising wedge pattern will be you target 1, 2 and 3. You can use trailing stoploss to maximize your profit.
KEY TAKEAWAYS
- The rising Wedge (ascending wedge) is a technical chart pattern used to identify the opportunity to earn profits in stock market.
- The wedges can form in both pointing upward or downward direction.
- It has a similar looking pattern called Falling wedge pattern also called Descending Wedge
- A rising wedge can be used in the bearish chart pattern that indicates a potential breakout to the downside.
- The rising wedge pattern is coming very handy with decreasing volume. The rising wedge also indicates the continuation of the current trend.