Wedge
Looks like a triangle, but both boundaries slope the same way. A sign that the move is running out of steam.
Wedge — what it is?
A wedge is two converging lines pointing the same way. A rising wedge slopes up, a falling wedge slopes down.
It differs from a triangle by its slope: both boundaries run in one direction while the range narrows.
It reads as a fading move: price still makes new extremes, but each push is shorter than the last. This is where a wedge often coincides with a divergence.
Wedge — how it is built?
The boundaries are drawn across the extremes with wicks, at least two touches per side. Narrowing by itself is not a signal; the signal appears when divergence and a shift in structure are added to it.
Wedge — common mistakes
Trading the wedge as a standalone pattern.
Confusing it with a flag: a flag's boundaries are parallel, a wedge's converge.
Entering against the trend just because the move looks like it is fading.
Not waiting for confirmation from a break in structure.
Related to
Glossary
- triangle
- converging support and resistance lines.
- range
- movement inside a horizontal corridor with no clear direction.
- divergence
- price and the indicator pointing in different directions.
- flag
- a short correction in a sloped channel after an impulse.
- trend
- a steady directional move in price.