Get started

Wedge

A textbook reversal signal..And if you do not know what I mean then see the linked idea below ‘the study’. Now the market cap is way to small for my interest but it might appeal to someone or indeed someone who is interested in the long game. The reversal pattern is one we see play out time and time again in all markets. Most recently on a crypto called CFX (see example below). The psychology between buyers and sellers is very specific and is told in great detail on this particular pattern. The last 6-day candle to print on this chart informed you of the great weakness amongst sellers. This crucial.. for the moment demand returns there practically no resistance until new buyers sell into the market. Is it possible price action falls further? Sure. It is probable? No Ww Type: trade Risk: 1% Timeframe: now Return: At least 500% The study Example
Education
by without_worries
4
Trading Diverging Chart PatternsContinuing our discussion on trading chart patterns, this is our next tutorial after Trading Converging Chart Patterns This tutorial is based on our earlier articles on pattern identification and classification. Algorithmic Identification of Chart Patterns Flag and Pennant Chart Patterns In this tutorial, we concentrate on diverging patterns and how to define rules to trade them systematically. The diverging patterns discussed in this tutorial are: Rising Wedge (Diverging Type) Falling Wedge (Diverging Type) Diverging Triangle Rising Triangle (Diverging Type) Falling Triangle (Diverging Type) 🎲 Historical Bias and General Perception Before we look into our method of systematic trading of patterns, let's have a glance at the general bias of trading diverging patterns. 🟡 The Dynamics of Diverging Wedge Patterns Diverging Wedge patterns are typically indicative of the Elliott Wave Structure's diagonal waves, potentially marking the ending diagonal waves. That means that the patterns may signal the ending of a long term trend. Hence, the diverging rising wedge is considered as bearish, whereas the diverging falling wedge is considered as bullish when it falls under Wave 5 of an impulse or Wave C of a zigzag or flat. For an in-depth exploration, refer to our detailed analysis in Decoding Wedge Patterns Both rising wedge and falling wedge of expanding type offers lower risk reward (High risk and low reward) in short term as the expanding nature of the pattern will lead to wider stop loss. 🎯 Rising Wedge (Expanding Type) Expanding Rising Wedge pattern is historically viewed with bearish bias. 🎯 Falling Wedge (Expanding Type) Expanding Falling Wedge pattern is historically viewed with bullish bias. 🟡 The Dynamics of Diverging Triangle Patterns Diverging pattern in general means increased volatility. Increased volatility during the strong trends also mean reducing confidence that may signal reversal. 🎲 Alternate Approach towards trading diverging patterns Lack of back testing data combined with subjectivity in Elliott wave interpretation and pattern interpretation makes it difficult to rely on the traditional approach. The alternative method involves treating all expanding patterns equally and define a systematic trading approach. This involves. When the pattern is formed, define a breakout zone. One side of the breakout zone will act as breakout point and the other side will act as reversal point. Depending on the breakout or reversal, trade direction is identified. Define the rules for entry, stop, target and invalidation range for both directions. This can be based on specific fib ratio based on pattern size. Backtest and Forward test the strategy and collect data with respect to win ratio, risk reward and profit factor to understand the profitability of patterns and the methodology. Breaking it down further. 🟡 Defining The Pattern Trade Conditions Base can be calculated in the following ways. Distance between max and min points of the pattern. (Vertical size of the pattern) Last zigzag swing of the pattern (This is generally the largest zigzag swing of the pattern due to its expanding nature) This Base is used for calculation of other criteria. 🎯 Breakout Zone - Entry Points Breakout zone can be calculated based on the following. Long Entry (top) = Last Pivot + Base * (Entry Ratio) Short Entry (bottom) = Last Pivot - Base * (Entry Ratio) If the direction of the last zigzag swing is downwards, then top will form the reversal confirmation and bottom will form the breakout confirmation. Similarly, if the direction of the last zigzag swing is upwards, then top will become the breakout confirmation point and bottom will act as reversal confirmation point. 🎯 Stops Long entry can act as stop for short and vice versa. However, we can also apply different rule for calculation of stop - this includes using different fib ratio for stop calculation in the reverse direction. Example. Long Stop = Last Pivot - Base * (Stop Ratio) Short Stop = Last Pivot + Base * (Entry Ratio) 🎯 Invalidation Invalidation price is a level where the trade direction for a particular pattern needs to be ignored or invalidated. Invalidation price can be calculated based on specific fib ratios. It is recommended to use wider invalidation range. This is to protect ignoring the potential trades due to volatility. Long Invalidation Price = Last Pivot - Base * (Invalidation Ratio) Short Invalidation Price = Last Pivot + Base * (Invalidation Ratio) 🎯 Targets Targets can either be set based on fib ratios, as explained for other parameters. However, the better way to set targets is based on expected risk reward. Target Price = Entry + (Entry-Stop) X Risk Reward 🟡 Back Test and Forward Test and Measure the Profit Factor It is important to perform sufficient testing to understand the profitability of the strategy before using them on the live trades. Use multiple timeframes and symbols to perform a series of back tests and forward tests, and collect as much data as possible on the historical outcomes of the strategy. Profit Factor of the strategy can be calculated by using a simple formula Profit Factor = (Wins/Losses) X Risk Reward 🟡 Use Filters and Different Combinations Filters will help us in filtering out noise and trade only the selective patterns. The filters can include a simple logic such as trade long only if price is above 200 SMA and trade short only if price is below 200 SMA. Or it can be as complex as looking into the divergence signals or other complex variables.
Editors' picks
NASDAQ:TSLAEducation
by Trendoscope
7
Falling wedge aka continued patternThe formation of any triangle is a direction indication relevant to where you find it as some can be a warning if reversal. The market moves in grids(zones). Relevant to sentiment of traders and news. It always moves in wave 🌊 and in those waves we have patterns like ABCD resumption. Failure swings💰👃, 🐂 bullish breakouts, traps ECT. The thing is impulsive moves is where you want to be even though it may be a correction. The thing with that is only with rising wedge patterns that are confirmed by long wicked 🔨 that indicate a move to the downside and this is like I said the day being under pressure from all the wicks formed by sellers and buyers showing no strength or news keeping it suppressed. This is your classic break and retest strategy. Like I said the money is in the trend and the impulses is always where you want to be mostly breakouts from levels continuing with the direction of the day - down to MN if you that good. The SL of the pattern invalidates the idea and if any near term trails can be hit we get even better low entries. Remember your idea is only invalid when it doesn't hold weekly and MN TF key levels. This can also be seen by the RSI as it shows the strength of candlesticks relevant to highs and lows of the sessions. Risk management is key especially if you have an account from 2$-100$. We only increase size when the accounts over 250-500$ which will give you a chance at playing 0.05 not saying it isn't possible at 70$ but you risk blowing it faster than a single 0.01 that just loses 1-5$ depending how the setup looks. If you feel like it won't work the SL should be 100 pips of not 10-50 pips which is 0.30cents to 0.72c$ Entry will be a breakout. And anything playing and rejected in that area can be waited for a signal to go long. Obviously if you don't have money to blow on risk like a 0.01 and lose 20$ in one go than don't. You risk smaller that's why we wait for lows or zone to enter example 0.01 and a lose of 2-4$. You can always trade gold with a small amount and turn it to a lot thing is it will kick you out if you dont take profits or secure them in positive SL of 1_5$ The TP is usually the inside of the pattern or the impulse before. Remember wave move in 5-1-2-3-4 and five. 2-correction can't be a triangle so it's usually rectangle 4- correction Triangle 📐 and it moves up 3-the largest impulse bigger than wave1-&5, but never small than 1 1impulse can be an extension (1-2-3-4-5 wave in wave one ), 5 can be the same as ones length Now the thing about waves is the counting that gets difficult especially if the complex corrections. Therefore for m30, you play the day and if it doesn't hit one target or the second you positive SL and wait for better entries. Gold can make you bank if you play it right, I mean risk manage your account to small losses and close large ones you can always enter again another place a ladder positions. Please like if this education is helpful 🙏
FX_IDC:XAUUSDEducation
by GCGoldenCircle
2
Trading Converging Chart PatternsWe discussed identification and classification of different chart patterns and chart pattern extensions in our previous posts. Algorithmic Identification of Chart Patterns Flag and Pennant Chart Patterns In this installment, we shift our focus towards the practical trading strategies applicable to a select group of these patterns. Acknowledging that a universal trading rule cannot apply to all patterns, we narrow our examination to those of the converging variety. We will specifically address the following converging patterns: Rising Wedge (Converging Type) Falling Wedge (Converging Type) Converging Triangle Rising Triangle (Converging Type) Falling Triangle (Converging Type) This selection will guide our discussion on how to approach these patterns from a trading perspective. 🎲 Historical Bias and General Perception Each pattern we've discussed carries a historical sentiment that is widely regarded as a guideline for trading. Before we delve into our specific trading strategies, it's crucial to understand these historical sentiments and the general market interpretations associated with them. 🟡 The Dynamics of Contracting Wedge Patterns Contracting Wedge patterns are typically indicative of the Elliott Wave Structure's diagonal waves, potentially marking either the beginning or conclusion of these waves. A contracting wedge within a leading diagonal may experience a brief retracement before the trend resumes. Conversely, if found in an ending diagonal, it could signal the termination of wave 5 or C, possibly hinting at a significant trend reversal. The prevailing view suggests that these patterns usually precede a short-term directional shift: Rising Wedges are seen as bearish signals, while Falling Wedges are interpreted as bullish. It's essential to consider the trend prior to the formation of these patterns, as it significantly aids in determining their context within the Elliott Wave cycles, specifically identifying them as part of waves 1, A, 5, or C. For an in-depth exploration, refer to our detailed analysis in Decoding Wedge Patterns 🎯 Rising Wedge (Converging Type) The Rising Wedge pattern, historically viewed with a bearish bias, suggests that a downward trend is more likely upon a breakout below its lower trend line. This perception positions the pattern as a signal for traders to consider bearish positions once the price breaks through this critical support. 🎯 Falling Wedge (Converging Type) The Falling Wedge pattern is traditionally seen through a bullish lens, indicating potential upward momentum when the price surpasses its upper trend line. This established viewpoint suggests initiating long positions as a strategic response to such a breakout, aligning with the pattern's optimistic forecast. 🟡 Contracting Triangle Patterns Contracting Triangles, encompassing Converging, Ascending, and Descending Triangles, are particularly noteworthy when they appear as part of the Elliott Wave's B or 2 waves. These patterns typically signal a continuation of the pre-existing trend that preceded the triangle's formation. This principle also underpins the Pennant Pattern, which emerges following an impulse wave, indicating a pause before the trend's resumption. 🎲 Alternate Way of Looking into Converging Patterns Main issue with historical perception are: There is no clear back testing data to prove whether the general perception is correct or more profitable. Elliott Waves concepts are very much subjective and can be often difficult for beginners and misleading even for experts. So, the alternative way is to treat all the converging patterns equally and devise a method to trade using a universal way. This allows us to back test our thesis and be definitive about the profitability of these patterns. Here are our simple steps to devise and test a converging pattern based strategy. Consider all converging patterns as bidirectional. Meaning, they can be traded on either side. Thus chose to trade based on the breakout. If the price beaks up, then trade long and if the price breaks down, then trade short. For each direction, define criteria for entry, stop, target prices and also an invalidation price at which the trade is ignored even without entry. Backtest and Forward test the strategy and collect data with respect to win ratio, risk reward and profit factor to understand the profitability of patterns and the methodology. Now, let's break it further down. 🟡 Defining The Pattern Trade Conditions Measure the ending distance between the trend line pairs and set breakout points above and beyond the convergence zone. 🎯 Entry Points - These can be formed on either side of the convergence zone. Adding a small buffer on top of the convergence zone is ideal for setting the entry points of converging patterns. Formula for Entry can be: Long Entry Price = Top + (Top - Bottom) X Entry Ratio Short Entry Price = Bottom - (Top-Bottom) X Entry Ratio Whereas Top refers to the upper side of the convergence zone and bottom refers to the lower side of the convergence zone. Entry Ratio is the buffer ratio to apply on top of the convergence zone to get entry points. 🎯 Stop Price - Long entry can act as stop for short orders and the short entry can act as stop price for long orders. However, this is not mandatory and different logic for stops can be applied for both sides. Formula for Stop Can be Long Stop Price = Bottom - (Top - Bottom) X Stop Ratio Short Stop Price = Top + (Top - Bottom) X Stop Ratio 🎯 Target Price - It is always good to set targets based on desired risk reward ratio. That means, the target should always depend on the distance between entry and stop price. The general formula for Target can be: Target Price = Entry + (Entry-Stop) X Risk Reward 🎯 Invalidation Price - Invalidation price is a level where the trade direction for a particular pattern needs to be ignored or invalidated. This price need to be beyond stop price. In general, trade is closed when a pattern hits invalidation price. Formula for Invalidation price is the same as that of Stop Price, but Invalidation Ratio is more than that of Stop Ratio Long Invalidation Price = Bottom - (Top - Bottom) X Invalidation Ratio Short Invalidation Price = Top + (Top - Bottom) X Invalidation Ratio 🟡 Back Test and Forward Test and Measure the Profit Factor It is important to perform sufficient testing to understand the profitability of the strategy before using them on the live trades. Use multiple timeframes and symbols to perform a series of back tests and forward tests, and collect as much data as possible on the historical outcomes of the strategy. Profit Factor of the strategy can be calculated by using a simple formula Profit Factor = (Wins/Losses) X Risk Reward 🟡 Use Filters and Different Combinations Filters will help us in filtering out noise and trade only the selective patterns. The filters can include a simple logic such as trade long only if price is above 200 SMA and trade short only if price is below 200 SMA. Or it can be as complex as looking into the divergence signals or other complex variables.
Editors' picks
Education
by Trendoscope
13
Turning Traps into Profitable Opportunities ! TOP 3 PATTERNSTrading traps are a common occurrence in the cryptocurrency market. They can be created by a variety of factors, including market manipulation, technical analysis, and psychological biases. While traps can be dangerous for traders who are not prepared, they can also be a source of profit for those who know how to trade them effectively. In this article, we will discuss three common trading traps and how to trade them profitably. We will also discuss how traps are created and how they can be used to your advantage. What Are Trading Traps? Trading traps are false movements in the price of a cryptocurrency that are designed to trick traders into taking a position in the wrong direction. They can be created by a variety of factors, including: Market manipulation: Market manipulators may create traps to trick traders into taking positions that are in their favor. For example, they may buy a large amount of a cryptocurrency to drive up the price, and then sell it off quickly to create a sell-off. Technical analysis: Technical analysts may use traps to take advantage of traders who are following technical indicators. For example, they may create a false breakout of a support or resistance level to trigger stop-loss orders. Psychological biases: Psychological biases, such as fear of missing out (FOMO) and fear of loss (FUD), can also lead traders to fall into traps. For example, a trader who is afraid of missing out on a potential bull run may be more likely to buy into a false breakout. In the example above, LINK was trading in a horizontal range for several months. The price then broke below the lower range boundary, which was a sign of a potential bear trap. However, the price quickly reversed and re-tested the lower range boundary. This was a good opportunity to enter a long position, as it showed that the trend was still in place. How to Identify Trading Traps There are a few things you can look for to help you identify trading traps, including: Volume: A sudden increase in volume can be a sign that a trap is being set. This is because market manipulators or technical analysts will often need to buy or sell a large amount of cryptocurrency to create a false movement in the price. Price action: A false breakout or fakeout is often accompanied by a sharp reversal in price action. For example, a false breakout of a support level may be followed by a sharp sell-off. Technical indicators: Some technical indicators, such as the Bollinger Bands, can help you identify potential traps. For example, the Bollinger Bands may widen before a false breakout, which can be a sign that a trap is being set. How to Trade Trading Traps Once you have identified a trap, you can trade it in one of two ways: Long trap: If you believe that the trend will continue, you can enter a long position on the re-test of the breakout level. Short trap: If you believe that the trend will reverse, you can enter a short position on the break of the breakout level. Examples of Trading Traps 3.1 Triangular Trap Unveiled: Discuss the bearish implications of descending triangles in technical analysis and their potential use as manipulation tools. Explore how market manipulators engineer these patterns to trigger artificial stop-losses. Case Study: NEAR's Triangular Intricacies: Analyze NEAR's descent within a descending triangle and its unexpected breakout. Offer insights into the motives behind orchestrating such traps and how traders can leverage these market dynamics. Here are some examples of how trading traps can be created and traded: Shakeout trap A shakeout trap is a false breakout that is designed to trick traders into taking a position in the wrong direction. For example, a cryptocurrency may be trading in a horizontal range for several months. The price then breaks below the lower range boundary, which is a sign of a potential bear trap. However, the price quickly reverses and re-tests the lower range boundary. This is a good opportunity to enter a long position, as it shows that the trend is still in place. Fakeout trap A fakeout trap is similar to a shakeout trap, but it occurs after a trend has already begun. For example, a cryptocurrency may be in a bull market. The price then breaks above a resistance level, which is a sign that the bull market is continuing. However, the price quickly reverses and re-tests the resistance level. This is a good opportunity to enter a short position, as it shows that the bull market may be coming to an end. Reversal trap A reversal trap is when the trend of a market changes direction. For example, a cryptocurrency may be in a bull market. The price then breaks below a support level, which is a sign that the bull market is ending. However, the price quickly reverses and re-tests the support level. This is a good opportunity to enter a long position, as it shows that the bull market may be resuming. The Art of Spotting Fakeouts: Define the concept of fakeouts and unveil their potential as precursors to bullish movements. Offer insights into distinguishing genuine breakouts from manipulative traps set by market actors. Case Study: ZIL's Quick Turnaround: Uncover the Zilliqa (ZIL) chart, examining the deceptive fakeout beneath a pivotal horizontal level. Emphasize the strategic importance of waiting for a retest post-fakeout as a confirmation signal. Conclusion Trading traps can be a dangerous but profitable part of cryptocurrency trading. By understanding how traps are created and how to identify them, you can increase your chances of trading them successfully. Additional Tips for Trading Trading Traps Use stop losses: Stop losses can help you limit your losses if you are wrong about a trade. Be patient: Do not rush into a trade just because you see a trap. Wait for the
Education
by Yaroslav_Krasko
2
Learn Best Price Action Patterns by Accuracy Last year, I shared more than 1300 free signals and forecasts for Gold, Forex, Commodities and Indexes. In my predictions, quite often I relied on classic price action patterns. In this article, I will reveal the win rate of each pattern, the most accurate and the least accurate formations of the last year. Please, note that all the predictions and forecasts that I shared this year are available on TradingView and you can back test any of the setup that I identified this year by your own. Just choose a relevant tag on my TradingView page. Also, some forecasts & signals were based on a combination of multiple patterns. Here is the list of the patterns that I personally trade: 🔘 Double Top or Bottom with Equal Highs The pattern is considered to be valid when the highs or lows of the pattern are equal. The pattern gives a bearish/bullish signal when its neckline is broken. 🔘 Double Top or Bottom with Lower High/Higher Low or Cup & Handle The pattern is considered to be valid when the second top/bottom of the patterns is lower/higher than the first one. The pattern gives a bearish/bullish signal when its neckline is broken. 🔘 Head & Shoulders and Inverted Head and Shoulders The pattern gives a bearish/bullish signal when its neckline is broken. 🔘 Horizontal Range The pattern is the extension of a classic double top/bottom with at least 3 equal highs/lows. The pattern gives a bearish/bullish signal when its neckline is broken. 🔘 Bullish/Bearish Flag The pattern represents a rising/falling parallel channel. It gives a bullish/bearish signal when its upper/lower boundary is broken. 🔘 Rising/Falling Wedge Pattern The pattern represents a contracting rising/falling channel. It gives a bullish/bearish signal when its upper/lower boundary is broken. 🔘 Rising/Falling Expanding Wedge The pattern represents an expanding rising/falling channel. It gives a bullish/bearish signal when its upper/lower boundary is broken. 🔘 Descending/Ascending Triangle The pattern is the extension of a cup & handle pattern with at least 2 lower highs/lows. The pattern gives a bearish/bullish signal when its neckline is broken. Please, also note that all the patterns that I identified and traded were formed on key horizontal or vertical structures. Remember that the accuracy of any pattern drops dramatically if it is formed beyond key levels. I consider the pattern to be a winning one if after a neckline breakout, it managed to reach the closest horizontal or vertical structure, not invalidating the pattern's highs/lows. For example, if the price violated the high of the cup and handle pattern after its neckline breakout, such a pattern is losing one. If it reached the closest structure without violation of the high, it is a winning pattern. 🔍 Double Top or Bottom with Equal Highs I spotted 85 setups featuring these patterns. Their accuracy is 62%. 🥉 Double Top or Bottom with Lower High/Higher Low or Cup & Handle 96 setups were spotted. The performance turned out to be a little bit higher than a classic double top/bottom with 65% of the setups hitting the target. 🔍 Head & Shoulders and Inverted Head and Shoulders 58 formations spotted this year. Average win rate is 64% 🏆 Horizontal Range The most accurate pattern of this year. More than 148 patterns were spotted and 74% among them gave accurate signal. 🔍 Bullish/Bearish Flag 38 setups identified this year. The accuracy of the pattern is 57% Rising/Falling Wedge The pattern turned out to be a little bit more accurate. Among 62 formations, 59% end up being profitable. 👎 Rising/Falling Expanding Wedge The worst pattern of this year. I recognized 24 patterns and their accuracy was just 51%. 🥈 Descending/Ascending Triangle 64 patterns were identified. The win rate of the pattern is 66%. The most important conclusion that we can make analyzing the performance of these patterns is that they all have an accuracy above 50%. If you properly combine these patterns with some other technical or fundamental tools, the accuracy of the setup will increase dramatically. Good luck in your trading! ❤️Please, support my work with like, thank you!❤️
Editors' picks
OANDA:XAUUSDEducation
by VasilyTrader
27
Algorithmic Identification and Classification of Chart PatternsWelcome to the world of technical analysis, where chart patterns play a pivotal role in shaping trading strategies. This is an ultimate guide designed to help users objectively identify the existence of patterns, define the characteristics and classify them. In this discussion, we will mainly concentrate on the patterns formed by trend line pairs. This includes wedges, triangles and channel type patterns. 🎲 Basic Principle of Identifying the Pattern It is very important to apply definitely set of rules when identifying the patterns in order to avoid biases or fitting patterns to our opinions. The dangers of overfitting the patterns to our bias is documented in the idea To identify the patterns objectively, we need to set some ground rules or follow a well-defined technique to derive the patterns. Here is the technique we follow to identify chart patterns. 🎲 Only Indicator Required - Zigzag Tradingview has plenty of free community scripts for Zigzag indicator. For this demonstration, we are going to use our Multi Timeframe Recursive Zigzag implementation. Once the indicator is loaded on the chart, go to indicator settings and perform these modifications. Disable the Labels : The Labels contain information that is needed for this exercise. Set the Highlight level to 1 or 0 : We can iteratively increase the level and check next levels on the go. You can also adjust Zigzag Length and Depth Parameters. 🎲 Scanning and Identification of valid Pattern We can either use 5 pivots or 6 pivots for pattern identification. 5-Pivot based scanning will generate more patterns than 6-Pivot based scanning. 6 pivot patterns are geometrically more accurate however, there is no proof that 6-Pivot based patterns produce better trading outcome. 🎯 Step 1 - On each level of zigzag, mark the last 5 or 6 zigzag pivots. Since we are using Multi Timeframe Recursive Zigzag implementation, we can gradually increase the zigzag level from 0. This means that on every level, we can check if there are any patterns. On each level - consider only the last 5 or 6 pivots and mark them on the chart. Markings on Level 0 would look like this for 5 and 6 pivot scanning 🎯 Step 2: Draw Trend Lines As part of this step, draw two trend lines. The first trend line will join pivots 1 and 5 marked in the previous step. The second trend line will join pivots 2 and 4 marked in the previous step for 5 pivot scanning. For 6 pivot scanning, the trend line joining pivots 2 and 6 will be marked. 🎯 Step 3: Inspect the validity of trend lines A valid trend line is the one that confirm to below two points Touches all the alternate pivots. For example, the trend line drawn from pivot 1 to 5 should also make contact with the candle of pivot 3. In case of 6 pivot scanning, the trend drawn from pivot 2 to 6 should also make contact with the candle of pivot 4. All the candles from the starting pivot to ending pivot of the zigzag should be confined within the trend line pairs. Meaning, no candles should completely go above the upper trend line and no candle should completely go below the lower trend line. Please note that while verifying the above points, minor adjustments in the alignment of the trend line can be made. Start and end of the trend line does not need to be on the high/low points of the candle, it can also be placed in any of the wick positions. After adjusting the trend lines, in both type of scanning, we can see that the trend lines confirm to the above-mentioned rules. Hence, we have arrived with valid patterns in both types of scanning on the level 0 zigzag. 🎲 Classification of Patterns Once the patterns are identified, they need to be classified into different types. We need to apply predetermined rules to objectively classify patterns into what they are. Everyone can build their own rules. 🎯 Properties of Derived Trend Lines Before classifying the trend lines, we need to understand below properties of the derived trend lines. ▶ Direction of Individual Trend Lines Both the trend lines needs to be individually classified among these categories Rising - Trend Line is sharply rising up. Falling - Trend Line is sharply falling down. Flat - Trend Line is flat across the pivots. Bi-Directional - Trend Lines are moving in opposite directions Please note that, it is less probable for trend line to absolutely flat. Hence, allow angle to have certain degree of threshold to be considered as flat. For example, +- 10 degrees can be considered as flat. Also, the angle of the trend line can further subjective based on how compressed the chart is. It is recommended to use either log/auto-scale or a specific formula based on ATR to identify the angle. ▶ Characteristic of the Trend Line Pairs This parameter defines how both trend lines are aligned with respect to each other. Possible options are: Converging - Trend Lines are converging and when extended towards the right will intersect at a visible distance. Diverging - Trend Lines are diverging from each other and when extended towards the left will intersect at a visible distance. Parallel - Trend Lines are almost parallel to each other and may not intersect to either right or to left at a visible distance. To objectively identify the intersection distance, we further need to use some standard. Here are few options Fixed Number of Bars : If the trend lines do not intersect to either left or right within X bars (Lets say 100), they can be considered as parallel. Otherwise, they can be classified as converging or diverging based on which side the intersection happens. Relative to the Length of Pattern : If the length of longest trend line is X bars. The trend lines should converge within 1–2 times the X bars to be considered as converging or diverging. Or else, it can be termed as parallel channels. 🎯 Geometrical Shapes Classification Following are the main geometrical classifications based on the characteristics of the trend lines and the pair. Channels - Trend Lines are parallel to each other. And hence they both move in the same directions. Wedges - Trend Lines are either converging or diverging from each other. However, both trend lines move in the same direction. Both trend lines will be either up or down. Triangles - Trend Lines are either converging or diverging from each other. But, unlike wedges, upper and lower trend lines will have different direction. 🎲 Types of Patterns Once we identify the direction and characteristics of trend lines, we can go on and classify the pattern in following categories. Details below. Please note that examples are generated programmatically. 🎯 Rising Wedge (Contracting) Rules for Contracting Rising Wedge are as follows: Both Trend Lines are Rising Trend Lines are converging. 🎯 Rising Wedge (Expanding) Rules for the Expanding Rising Wedge are as follows: Both Trend Lines are rising Trend Lines are diverging. 🎯 Falling Wedge (Contracting) Rules for the Contracting Falling Wedge are as follows: Both Trend Lines are falling Trend Lines are contracting. 🎯 Falling Wedge (Expanding) Rules for the Expanding Falling Wedge are as follows: Both Trend Lines are falling Trend Lines are diverging. 🎯 Contracting/Converging Triangle Rules for the Contracting Triangle are as follows The upper trend line is falling The lower trend line is rising Naturally, the trend lines are converging. 🎯 Rising Triangle (Contracting) The rules for the Contracting Rising Triangle are as follows The upper trend line is flat The lower trend line is rising Naturally, the trend lines are converging towards each other 🎯 Falling Triangle (Contracting) The rules for the Contracting Falling Triangle are as follows The upper trend line is falling The lower trend line is flat Naturally, the trend lines are converging towards each other 🎯 Expanding/Diverging Triangle Rules for the Expanding Triangle are as follows The upper trend line is rising The lower trend line is falling Naturally, the trend lines are diverging from each other. 🎯 Rising Triangle (Expanding) The rules for the Expanding Rising Triangle are as follows The upper trend line is rising The lower trend line is flat Naturally, the trend lines are diverging from each other 🎯 Falling Triangle (Expanding) The rules for the Expanding Falling Triangle are as follows The upper trend line is flat The lower trend line is falling Naturally, the trend lines are diverging from each other 🎯 Rising/Uptrend Channel Rules for the Uptrend Channel are as follows Both trend lines are rising Trend lines are parallel to each other 🎯 Falling/Downtrend Channel Rules for the Downtrend Channel are as follows Both trend lines are falling Trend lines are parallel to each other 🎯 Ranging Channel Rules for the Ranging Channel are as follows: Both trend lines are flat Naturally, the trend lines are parallel to each other.
Editors' picks
CAPITALCOM:US100Education
by Trendoscope
44
Market structure, Right side of the marketMarket structure is one of the most important thing one can learn in trading. If you are day trading or investing staying on right side of the market is very important. Market structure help to identify the right side of the market. Lets say market is making HH (Higher high) and HL (higher low) that's bullish market structure. Meaning buyers are in control and its a bull trend. If market making LL (Lower low) and LH (Lower high) then seller are in control making it a bear trend. Market are always in trend or trading range. In trend you are either in a bull trend or a bear trend. Market usually don't go from bull trend to bear trend. Often it will stay a trading range after a trend. If market breaks that trading range in trend direction then we call that flag pattern. If it was a bull tend a bull flag and on a bear trend a bear flag, but if price fails to continue going in earlier trend direction then its become a failed flag and then trader thinks we might get a trend reversal. lets say market is in a bull trend so its making HH and HL . But if market fail to make a HH or HL and it ends up making LH then people start to think if this bull trend is still a strong bull trend which can cause market to shift from bull trend to trading range. And after a LL many bull will get out of their position which could create a LH and end up reversing a trend. In which case if price in a bull structure and market making HH and HL you should only be a buyer and after market structure change its direction then you can think if you should sell.
FX:NAS100Education
by bijoypq
a rising wedgeA rising wedge is a pattern that forms on a fluctuating chart and is caused by a narrowing amplitude. If you draw lines along with the highs and lows, then the two lines will form an imaginary angle that will narrow over time. Moreover, this angle’s inclination must be positive; the resulting corner should be pointing upward, indicating an uptrend. A rising wedge is a bearish reversal pattern. Typically, a rising wedge reverses an uptrend, but there are exceptions. It sometimes happens that the rising wedge continues the trend. If there was a downtrend before the rising wedge, then the price goes down after the wedge, and it turns out that the rising wedge continues the trend. But it is important to remember that in any case, after the rising wedge, there is a price decline. The rising wedge is not a very common pattern and is not very easy to spot. Even though bulls and bears appear to be in relative equilibrium, the narrowing of the rising wedge corridor suggests that supply is winning. In the end, buyers break down, and sellers take control of the market. To determine how the price will behave further, it is necessary to further analyze this instrument. Trading Advantages for Wedge Patterns As a general rule, price pattern strategies for trading systems rarely yield returns that outperform buy-and-hold strategies over time, but some patterns do appear to be useful in forecasting general price trends nonetheless. Some studies suggest that a wedge pattern will breakout towards a reversal (a bullish breakout for falling wedges and a bearish breakout for rising wedges) more often than two-thirds of the time, with a falling wedge being a more reliable indicator than a rising wedge. Because wedge patterns converge to a smaller price channel, the distance between the price on entry of the trade and the price for a stop loss, is relatively smaller than the start of the pattern. This means that a stop loss can be placed close by at the time the trade begins, and if the trade is successful, the outcome can yield a greater return than the amount risked on the trade to begin with.
Education
by ForxTay
Decoding Market Patterns:10 Essential Price Patterns Every TradeIn the intricate world of trading, price patterns are the footprints left by market sentiment. Understanding these patterns is like deciphering a complex code, revealing insights into potential market movements. Today we will explore 10 essential price patterns every trader should recognize. Each pattern is a chapter in the dynamic story of market behavior, offering opportunities to identify trends, reversals, and strategic entry or exit points. 1. Bull Flag: The Flagbearer of Continuation A Bull Flag is a continuation pattern, often seen in strong uptrends. It resembles a flagpole (the initial price spike) followed by a rectangular flag (consolidation phase). When the price breaks above the upper boundary of the flag, it signals a potential continuation of the uptrend. 2. Bear Flag: The Bearish Counterpart The Bear Flag is the opposite of the Bull Flag. It appears in downtrends, with a flagpole representing the initial price drop followed by a consolidation period. When the price breaches the lower boundary of the flag, it indicates a potential continuation of the downtrend. 3. Head and Shoulders: The Classic Trend Reversal The Head and Shoulders pattern is a powerful reversal indicator. It consists of three peaks – the central peak (head) is higher than the surrounding peaks (shoulders). When the price drops below the neckline (a line drawn through the lowest points of the shoulders), it suggests a potential trend reversal from bullish to bearish. 4. Inverse Head and Shoulders: The Bullish Resurgence The Inverse Head and Shoulders pattern is the bullish counterpart of the Head and Shoulders. It occurs after a downtrend and indicates a potential reversal to an uptrend. The pattern consists of three troughs – the central trough (head) is lower than the surrounding troughs (shoulders). When the price rises above the neckline, it signals a potential shift from bearish to bullish. The cool thing about chat patterns is that they are everywhere. You often see many different chart patterns on a singular chart, or smaller patterns that are a part of a larger pattern. The tricky part is finding them and appropriately identifying them. 5. Double Top: The Bearish Reversal Duo A Double Top pattern occurs after an uptrend and signals a potential reversal. It consists of two peaks at nearly the same price level, indicating a struggle to push the price higher. When the price falls below the trough between the peaks, it suggests a possible shift from bullish to bearish. 6. Double Bottom: The Bullish Reversal Duo The Double Bottom is the bullish counterpart of the Double Top. It occurs after a downtrend and signals a potential reversal to an uptrend. It consists of two troughs at nearly the same price level, indicating a struggle to push the price lower. When the price rises above the peak between the troughs, it suggests a potential shift from bearish to bullish. 7. Rising Wedge: The Rising Price Constrictor A Rising Wedge is a bearish continuation or reversal pattern. It can form during a downtrend or in an uptrend where buying pressure becomes exhausted. The wedge is characterized by converging trend lines that slope upward. While the price may make higher highs and higher lows, the pattern tightens, indicating weakening momentum. When the price breaks below the lower trendline, it suggests a potential continuation of the downtrend or reversal of an uptrend. Rising Wedge Reversal Example: Rising Wedge Continuation Example: 8. Falling Wedge: The Falling Price Constrictor The Falling Wedge is the bullish counterpart of the Rising Wedge. It forms during an uptrend or a downtrend, characterized by converging trend lines that slope downward. While the price may make lower highs and lower lows, the pattern tightens, indicating weakening selling pressure. When the price breaks above the upper trendline, it suggests a potential continuation of the uptrend. Falling Wedge Continuation Example: Falling Wedge Reversal Example: 9. Symmetrical Triangle: The Balance of Bulls and Bears A Symmetrical Triangle is a neutral pattern that forms during a trend, indicating a period of consolidation. It is characterized by converging trend lines that slope in opposite directions. When the price breaks above the upper trendline, it signals a potential bullish move, and when it breaks below the lower trendline, it signals a potential bearish move. 10. Pennant: The Brief Consolidation Pause A Pennant is a continuation pattern that forms after a strong price movement. It resembles a small symmetrical triangle, indicating a brief consolidation before the previous trend resumes. When the price breaks above the upper boundary, it suggests a potential bullish continuation, and when it breaks below the lower boundary, it suggests a potential bearish continuation. Important Thing To Consider: Price patterns are a tool that if practiced and executed properly can be a great asset for any trader. There are a few things that all traders should keep in mind when using price patterns to make trading decisions. Context is critical: Price patterns don't exist in isolation; they occur within the context of larger market trends. It's essential to consider the prevailing market conditions, including the overall trend (bullish, bearish, or sideways), volume trends, and recent price action. Confirmation is Key: While recognizing a price pattern is an important skill, relying solely on its formation might lead to premature or false trades. Traders should always wait for confirmation signals before taking action. Confirmation can come in the form of a price breakout above a pattern's resistance level, a significant increase in trading volume confirming the pattern's direction, or additional technical indicators aligning with the pattern's signal. Waiting for confirmation helps traders filter out false signals, reducing the risk of entering trades based solely on pattern Risk management is paramount: No pattern, regardless of its historical accuracy, guarantees a profitable trade. Traders must always implement proper risk management strategies, including setting stop-loss orders and defining acceptable levels of risk per trade as a percentage of their trading capital. Risk management ensures that even if a trade based on a price pattern fails to materialize as expected, the impact on the trader's overall portfolio remains manageable. Practice, practice, practice: Identifying price patterns is a skill that improves with practice and experience. Traders should dedicate time to studying historical charts, both in live markets and during backtesting. Regularly practicing pattern charting enhances the ability to spot patterns quickly and accurately. TradingView offers a great set of tools to help anyone get started by offering a full line of automated pattern recognition indicators for educational and research use. Utilizing these automated pattern recognition indicators is a great way to visualize patterns in the real world as patterns are often less clean than textbook examples. Recognizing these price patterns equips traders with a valuable skill set for navigating a dynamic market. However, it's vital to remember that patterns, like pieces of a puzzle, offer meaningful insights when combined with other indicators and thorough analysis. No single pattern guarantees profits, and each should be evaluated within the context of the broader market conditions. By integrating pattern recognition into a holistic trading strategy, traders can unlock the door to more informed, confident, and strategic trading decisions. Happy trading! Ben with LeafAlgo
Editors' picks
NASDAQ:NVDAEducation
by LeafAlgo
19
Rising and Falling Wedges ExplainedWelcome to the world of trading patterns. If you appreciate our charts, give us a quick 💜💜 Today, we'll explore two important ones: the Rising Wedge and the Falling Wedge . These patterns can signal shifts in market trends. Let's dive in and see how they work. Rising Wedge: In an uptrend, the Rising Wedge hints at a bearish turn. It takes shape as prices find a middle ground between two upward-sloping lines, one as support and the other as resistance, both inching closer. As the price inches towards the wedge's tip, its upward push tends to fade, suggesting a potential shift to a downward trend. Your sell signal triggers with a bearish break beneath the wedge's support. Set a stop loss just above the wedge's highs. Aim for the next significant support level. Falling Wedge: Unlike the Rising Wedge, the falling wedge spells optimism in a downtrend. It emerges as prices consolidate between two downward-sloping lines, one providing support and the other resistance, both drawing nearer. As prices approach the wedge's apex, the downward momentum loses steam, hinting at a potential shift towards an upward trend. Your buy signal activates with a bullish breakout beyond the wedge's resistance. Place a stop loss just below the wedge's lows. Target the next notable resistance. Feel free to let us know your thoughts and if you have any questions. Your feedback is valuable and helps us improve. Happy trading!
Editors' picks
Education
by Vestinda
21
4 Classic Bullish Patterns EVERY TRADER Must Know In the today's post, we will discuss accurate bullish price action patterns that you can apply for trading any financial instrument. 1️⃣Bullish Flag Pattern Such a pattern appears in a bullish trend after a completion of the bullish impulse. The flag represents a falling parallel channel. The market corrects itself within. Bullish breakout of the resistance line of the channel is a strong bullish signal that can be applied for buying the market. Best entries should be placed immediately after a breakout or on a retest. Safest stop loss is below the lows of the flag. Target - the next key resistance. Here is the example of a bullish flag pattern that was formed on Gold on a 1H time frame. As you can see, after the breakout of the resistance of the flag, a strong bullish rally initiated. 2️⃣Ascending Triangle Such a pattern forms in a bullish trend on the top of the bullish impulse. The market starts consolidation, respecting the same highs and setting higher lows simultaneously. The equal highs compose a horizontal resistance that is called the neckline. Its breakout is an important sign of strength of the buyers. Buy the market aggressively after a violation, or set a buy limit order on a retest. Stop loss should lie at least below the last higher low within a triangle. Target - the next strong resistance. Take a look at that ascending triangle formation on EURUSD. Bullish breakout of its neckline was a perfect bullish signal. 3️⃣Falling Wedge That formation is very similar to a bullish flag pattern. The only difference is that the price action within the wedge is contracting so that the trend line of the wedge are getting closer to each other with time. Your signal to buy is a bullish breakout of the resistance of the wedge. Stop loss is strictly below its lows. Target - the next key resistance. GBPUSD formed a falling wedge on a 4H time frame, trading in a strong bullish trend. You can behold how nicely the price bounced after a breakout of its upper boundary. 4️⃣Horizontal Range Similarly to the ascending triangle, the horizontal range forms at the top of a bullish impulse in a bullish trend. The price starts consolidation, then, setting equal highs and equal lows that compose a horizontal channel. Breakout of the resistance of the range is a strong trend-following signal. Buy the market aggressively after a breakout or conservatively on a retest. Stop loss will lie below the lows of the range. Target - the next strong resistance. Dollar Index formed a horizontal range, trading in a strong bullish trend. Breakout of the resistance of the range triggered a bullish rally. The best part about these patterns is that they can be applied on any time frame. Whether you are a scalper, day trader or swing trader, you can rely on these formations and make consistent profits.
FOREXCOM:XAUUSDEducation
by VasilyTrader
10
Mastering the Rising Wedge Pattern in Forex: Your Path to Profit Are you ready to unlock the secrets of the rising wedge pattern in the thrilling world of forex trading? 🚀 In this comprehensive guide, we'll dive into the intricacies of trading this powerful chart pattern and show you how to harness its potential for profitable gains. 📊💰 Understanding the Rising Wedge Pattern 📈 The rising wedge pattern is a technical analysis formation that signals a potential reversal in the prevailing trend. Visually, it resembles a narrowing price range between two converging trendlines, with the upper trendline slanting more steeply than the lower one. This pattern suggests that buyers are becoming less enthusiastic, leading to a possible trend reversal. 📉📈 Trading the Rising Wedge: Step-by-Step Guide 📚 1. Identify the Pattern: Locate the two trendlines, ensuring there are at least two touches on the upper trendline and two on the lower trendline. 2. Confirming Volume: Observe the volume during the formation of the rising wedge. Ideally, there should be diminishing volume as the pattern develops, indicating weakening buying pressure. 3. Wait for Breakout: Anticipate a breakout below the lower trendline as confirmation of a potential downtrend. Consider using additional indicators to support your decision, such as RSI or MACD. 4. Set Stop Loss and Take Profit: Place your stop-loss above the recent swing high within the wedge, and set your take-profit level based on a reasonable risk-to-reward ratio. Real-Life Examples 📊🔍 1. Example 1: 2. Example 2: 3. Example 3: Unveil the potential of rising wedge patterns in forex trading and elevate your trading game today! 📈🔼🔽 Don't miss out on this opportunity to navigate the markets with greater confidence and precision. 💼🤑 Hey traders, let me know what subject do you want to dive in in the next post?
OANDA:XAUUSDEducation
by TopTradingSignals
10
Decoding the Rising Wedge Pattern in Forex Trading 📈📉👩‍💼 In the world of forex trading, recognizing and understanding chart patterns can provide traders with invaluable insights into potential price movements. One such pattern, the rising wedge, is a powerful tool for identifying impending trend reversals. In this article, we'll delve into the details of the rising wedge pattern, explore its characteristics, and provide real-world examples to help you navigate the forex market more effectively. 🚀📊🔍 Decoding the Rising Wedge Pattern The rising wedge is a bearish reversal pattern characterized by its narrowing price range between two ascending trendlines. It signals a potential shift from an uptrend to a downtrend, often preceding significant price declines. Key features of the rising wedge pattern include: 1.Two Sloping Trendlines: The upper trendline connects the higher highs, while the lower trendline links the higher lows. As time progresses, the price range between these trendlines contracts, creating a wedge-like shape. 📉↗️📉 2.Volume Analysis: Typically, volume diminishes as the pattern develops. This reduction in volume signifies decreasing interest and participation in the upward movement. 📉🔊📉 3.Bearish Implications: The narrowing price range indicates weakening buying pressure, as sellers gradually gain momentum. A breakout below the lower trendline confirms the pattern's completion and suggests a potential trend reversal. 🐻📉📈 Examples 1.Currency Pair A - EUR/USD: 2.Currency Pair B - GBP/JPY: 3.Currency Pair C - AUD/NZD: Navigating the Rising Wedge Pattern 1.Confirmation: While the pattern provides a bearish signal, traders often wait for a breakout below the lower trendline to confirm the reversal before entering a trade. 🔄🔍📉 2.Risk Management: Place stop-loss orders above the upper trendline to protect against false breakouts. ⛔️📈🛡 3.Target Levels: Project the potential price decline by measuring the height of the pattern and subtracting it from the breakout point. This can guide your profit-taking strategy. 📏📊💰 Mastering the recognition and interpretation of the rising wedge pattern empowers forex traders to anticipate trend reversals and execute trades with confidence. By studying the pattern's characteristics, volume trends, and breakout confirmation, you can enhance your trading strategy and make informed decisions in the dynamic forex market. 📚🔍📊 With the rising wedge pattern in your arsenal, you'll be able to ascend to profitable insights and navigate the forex market with skillful precision. 📉🔍💼👩‍🏫✨ Please, support my work with like and comment! Love you, my dear followers!👩‍💻🌸
Education
by AnabelSignals
5
Rising wedgeA rising wedge in an up trend is usually considered a reversal pattern. This pattern is at the end of a bullish wave, by creating close price tops, shows us that the supply has intensified and there is a possibility of a trend change. Of course, nothing is certain and if the buyers are more willing and strong, this pattern may be broken in the direction of the market rise. A rising wedge in the middle of a downtrend, is considered a corrective move and is known as a continuing pattern. For example, take a look at the above chart of Ethereum on the weekly time frame
Education
by Dealerify_HUNTER
HOW TO TRADE A WEDGE FORMATION IDENTIFYING A WEDGE FORMATION ↪️While wedges are commonly known as continuation patterns, they are also known to signal trend reversals at major tops and bottoms. The reversal patterns are much larger than a typical continuation wedge, and take significantly longer to form, so for the sake of all you short term swing and day traders, we will focus on wedges as continuation patterns here. ↪️Wedges hold similar traits to both flag and symmentrical triangle patterns, in that they are drawn using 2 converging trendlines meeting at an apex. Price action will run counter to the prevailing trend, so a bullish wedge will slope down, and a bearish wedge will slope up. You should see a noticeable drop in volume as price moves toward the apex, followed by a sharp increase once a breakout is confirmed. If price pulls back more than 50% of the prevailling trend move during the consolidation period, then the pattern is broken, and you should assume a change in trend is occurring. HOW TO TRADE A WEDGE FORMATION ↪️Confirmation of a breakout is made when a price bar closes above the upper trendline in a bullish wedge, and below the bottom trendline in a bearish wedge. The way this pattern is set up, it is highly recommended to wait for a breakout before initiating a position. In a bullish continuation wedge, the two converging trendlines are pointing in the same direction, representing a series of lower highs and lower lows, so playing the breakout makes the most sense, at least from a risk management perspective. Since you are entering the market near the bottom of the formation, your risk parameters are tight, while profit targets are exponentially expanded. Of course, more aggressive traders will still attempt to buy the lower trendline as the pattern progresses, and use new lows as stops and re-entry levels. However, the conservative method of waiting for confirmation will most likely yield higher profits in the long run. ↪️The inverse is true when trading bearish wedge formations. Price will make a series of higher highs and higher lows as it moves towards the apex, and a position can be initiated when a breakout is confirmed with a price bar closing below the lower trendline. FALSE BREAKOUTS ↪️A false breakout occurs when price moves above a resistance line or below a support line, and then quickly changes direction. These moves are known for trapping unsuspecting traders playing breakout levels on the wrong side, and then turning around to run their stops. More times than not, a false breakout will signal that the pattern you are charting has failed to produce the expected follow through, and your expectations of the trade need to be re-evaluated. ↪️Identifying a false breakout can be tricky, that is why it is so important to maintain discipline when it comes to risk management. The single easiest way to determine whether or not a breakout is true or false is to watch the volume patterns. As stated above, when price moves toward the apex of the wedge, you should begin to see a noticeable drop in volume, followed by a sharp increase as price breaks out of the formation. KEY POINTS ↪️The wedge formation is a low risk/high reward setup. Price and volume patterns need to align to confirm both the pattern and the breakout. If the formation takes too long to develop or if price moves too far away from the starting point, you may be witnessing a change in trend.
Education
by linofx1
6
📈How to Trade: Rising Wedge Pattern📌 What is the Rising Wedge Pattern? The rising wedge is a bearish chart pattern found at the end of an upward trend in financial markets. It suggests a potential reversal in the trend. It is the opposite of the bullish falling wedge pattern that occurs at the end of a downtrend. Traders recognize the rising wedge as a consolidation phase after a medium to long-term trend, indicating a decrease in momentum. Traders often use this pattern as a signal to take a short-selling position or exit their current position. 📊 How to Identify and Use the Rising Wedge 🔹 Identify an existing trend in a currency pair. 🔹 Draw support and resistance trend lines along with the highs and lows of the trend. 🔹 Wait for price consolidation and the contraction of the support and resistance lines, forming a rising wedge pattern. 🔹 Observe the upper trend line acting as resistance and the lower trend line acting as support, converging towards each other. 🔹 Place a sell order once the price breaks below the support line of the rising wedge pattern. 🔹 Set a stop-loss order at the same level as the support trend line to manage risk in case the price reverses. 🔹 Consider setting a profit target based on the distance between the highest and lowest points of the wedge pattern or by using a technical indicator or a previous support level as a reference. 💥 Key Takeaways: 🔸 The rising wedge is a technical chart pattern used to identify possible trend reversals. 🔸 The pattern appears as an upward-sloping price chart featuring two converging trendlines. 🔸 It is usually accompanied by decreasing trading volume. 🔸 A rising wedge is often considered a bearish chart pattern that indicates a potential breakout to the downside. 🔸 Wedges can either form in the rising or falling direction. 👤 @QuantVue 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
6
Decoding Wedge PatternsThere is a strong bias about chart patterns and their interpretation in the technical analysis space. It is a very common belief that a rising wedge forms bearish sentiment and a falling wedge forms bullish sentiment. Is that really true and how much we can rely on such bias? In order to understand this, we need to dig a little bit about how such concepts could have come into the picture. The best I could get on the internet is an article from Investopedia that explains few technical reasons and constraints of using these patterns. Through the Lens of Diagonal Waves But, when I was studying the concepts of waves, this is what I found from one of the sources I referred to about diagonal waves: ewtaf.com Details are summarised and explained in the below diagram The summary here is, Diagonal waves of contracting types are the same as that of Contracting Wedge patterns. And the diagonal waves of Expanding types represent expanding wedge chart patterns. Diagonal Waves can appear as sub-waves in multiple parts of the entire Elliott Wave. And here are our scenarios Leading Diagonals Leading diagonals are diagonal waves that can appear towards the start of a trend. This can be Wave 1 of an Impulse Wave - This is the start of a new trend. Avoid trading these wedges as they can be short pullbacks. Or better look for pullback and trading opportunities in the direction of the wedge. Wave A of a Zigzag Wave - This can lead to a possible bull trap or bear trap. The corrective wave is likely to continue after a small pullback Ending Diagonals Both expanding and contracting types can be ending diagonals. Can appear as Wave 5 of an Impulse Wave - Meaning the trend is coming towards possible exhaustion. Wave C of zigzag or flat - Correction or pullback is coming to an end and the trend is likely to continue Wolfe Wave Wolfe wave is a rule built on top of wedge patterns to identify time-bound targets. The idea of generating targets and stops based on the Wolfe Wave is as shown below:  Further, here are a few indicators developed in Pinescript that can help do them automatically. Wolfe Scanner Wolfe Strategy Takeaways Here are a few things we learnt from our study. When you are looking for wedge patterns on the chart, look for wedge formations created by 5 pivots. You can learn more about this from this post Fitting Patterns To Your Bias? Before trading a wedge pattern, try to identify if the pattern fits in a bigger scheme of things. Check if they are towards the end/start of a trend or pullback Concepts such as Wolfe Wave can help setup rules for trading wedge patterns for pullbacks.
Education
by Trendoscope
9
Wealth Unleashed: Wedge Pattern Power - Hidden Gem Revealed!Introduction: Are you looking to skyrocket your trading profits? Look no further! Today, we will uncover the hidden gem of trading patterns: the Wedge Pattern. This powerful tool has the potential to transform your trading strategy and help you achieve financial success. Let's dive into the world of wedge patterns and explore how you can capitalize on their power. What are Wedge Patterns? Wedge patterns are popular among traders due to their high probability of forecasting trend reversals. These patterns appear when the price of an asset consolidates between converging support and resistance lines. There are two primary types of wedge patterns: the rising wedge and the falling wedge. Rising Wedge: In an upward trend, the rising wedge is considered a bearish pattern. It forms when the price consolidates between an upward-sloping support line and an upward-sloping resistance line that are converging. As the price approaches the apex of the wedge, the upward momentum weakens, signaling a potential trend reversal to the downside. Falling Wedge: Contrary to the rising wedge, the falling wedge is a bullish pattern. It appears in a downward trend when the price consolidates between a downward-sloping support line and a downward-sloping resistance line that are converging. As the price nears the apex of the wedge, the downward momentum loses strength, indicating a possible trend reversal to the upside. Trading Strategies: To capitalize on the power of wedge patterns, follow these steps: ✅Identify the pattern: Observe the chart for converging support and resistance lines to spot a rising or falling wedge pattern. ✅Confirmation: Wait for a breakout from the wedge pattern, either above the resistance line (for falling wedges) or below the support line (for rising wedges). ✅Entry point: Open a long position after a breakout above the resistance line in a falling wedge, or a short position after a breakout below the support line in a rising wedge. ✅Stop-loss and take-profit: Set your stop-loss order below the breakout level (for falling wedges) or above the breakout level (for rising wedges). Establish your take-profit target at a level that aligns with your risk-reward ratio and trading plan. Conclusion: The wedge pattern is a hidden gem that can potentially boost your trading profits when used correctly. By mastering the art of identifying and trading wedge patterns, you can strengthen your technical analysis skills and increase your chances of success in the market. Remember, no single tool guarantees success, so always use additional technical indicators and maintain a disciplined approach to risk management. Happy trading!
Education
by Yaroslav_Krasko
Learn Top 4 Price Action Pattern to Trade Reversals Hey traders, In this article, I will share with you the list of 4 best reversal price action patterns. 📍Ascending & Descending Triangles The main element of the ascending triangle as the REVERSAL pattern is the BEARISH impulse leg, preceding the formation of the pattern. The pattern consist of 2 main elements: a horizontal neckline based on the equal highs, a rising trend line based on the higher lows. ❗️The trigger is a bullish breakout of a neckline of the pattern and candle close above. 📈The position is opened on a retest. 🔴Stop loss is lying at least below the level of the last higher low. 🎯Take profit is the next historical resistance. —————— 📍The main element of the descending triangle formation as the reversal pattern is the BULLISH leg, preceding the formation of the pattern. The pattern consist of 2 main elements: a horizontal neckline based on the equal lows, a falling trend line based on the lower highs. ❗️The trigger is a bearish breakout of a neckline of the pattern and candle close below. 📉The position is opened on a retest. 🔴Stop loss is lying at least above the level of the last lower high. 🎯Take profit is the next historical support. 📍Rising & Falling Wedges What makes a rising wedge pattern a reversal pattern? Before the formation of the pattern, the price should form a strong bullish impulse and trade in a bullish trend. The pattern consists of 2 contracting, rising trend lines based on the higher highs and higher lows. ❗️The trigger is a bearish breakout of a support of the pattern and candle close below. 📉The position is opened on a retest. 🔴Stop loss is lying above the high of the pattern. 🎯Take profit is the closest horizontal support. —————— What makes a falling wedge pattern a reversal pattern? Before the formation of the pattern, the price should form a strong bearish impulse and trade in a bearish trend. The pattern consist of 2 contracting falling trend lines based on the lower lows and lower highs. ❗️The trigger is a bullish breakout of a resistance of the pattern and candle close above. 📈The position is opened on a retest. 🔴Stop loss is lying below the low of the pattern. 🎯Take profit is the closest horizontal resistance. 📍Double Top & Bottom Double bottom pattern usually forms at the end of a bearish trend. After a strong bearish impulse, the price retraces, sets a lower high and retests the current low. Instead of going lower, the price retraces one more time, retests the level of the last lower high and breaks it. Such a formation confirms a bullish reversal. ❗️The trigger is a bullish breakout of a neckline of the pattern and a candle close above. 📈The position is opened on a retest. 🔴Stop loss is lying below the lows of the pattern. 🎯Take profit is the closest horizontal resistance. —————— Double top pattern usually forms at the end of a bullish trend. After a strong bullish impulse, the price retraces, sets a higher low and retests the current high. Instead of going higher, however, the price retraces one more time, retests the level of the last higher low and breaks it. Such a formation confirms a bearish reversal. ❗️The trigger is a bearish breakout of a neckline of the pattern and a candle close below. 📈The position is opened on a retest. 🔴Stop loss is lying above the highs of the pattern. 🎯Take profit is the closest horizontal support. 📍Head & Shoulders Pattern & Inverted One Inverted H&S pattern usually forms at the end of a bearish trend. The price forms a zig-zag movement with 3 main elements: the left shoulder with a lower low, the head with a new lower low, and the right shoulder with a higher low. While the price sets multiple lows, it keeps setting the equal highs, composing a so-called horizontal neckline. A bullish reversal becomes confirmed once the price breaks and closes above the neckline. ❗️The trigger is a bullish breakout of a neckline of the pattern and a candle close above. 📈The position is opened on a retest. 🔴Stop loss is lying below the lows of the pattern. 🎯Take profit is the closest horizontal resistance. —————— Head & Shoulders pattern usually forms at the end of a bullish trend. The price forms a zig-zag movement with 3 main elements: the left shoulder with a higher high, the head with a new higher high, and the right shoulder with a lower high. While the price sets multiple highs, it keeps setting the equal lows, composing a so-called horizontal neckline. A bearish reversal becomes confirmed once the price breaks and closes below the neckline. ❗️The trigger is a bearish breakout of a neckline of the pattern and a candle close below. 📈The position is opened on a retest. 🔴Stop loss is lying above the highs of the pattern. 🎯Take profit is the closest horizontal support. In order to increase the accuracy of trading these patterns, I would recommend trading them only if they are formed on key levels: Bearish patterns on key resistances and bullish patterns on key supports. Also, higher is the time frame where you spotted the patterns, higher is the chance that it will give a valid reversal signal. ❤️Please, support my work with like, thank you!❤️
FOREXCOM:XAUUSDEducation
by VasilyTrader
17
Uncovering Wyckoff Accumulation Secret PatternWyckoff Accumulation & Distribution is a trading strategy that was developed by Richard Wyckoff in the early 1900s. It is based on the premise that markets move in cycles and that traders may recognize and use these cycles. In accumulation phase Wyckoff strategy involves identifying a Trading Range where buyers are accumulating shares of a stock before it moves higher. This allows traders to enter into positions at lower prices and benefit from the eventual price increase. Wyckoff Accumulation is an effective way for traders and investors to gain on market movements and make profits from their trades. The Wyckoff Trading Ranges feature a chart pattern called Descending Wedge. This pattern involves two trendlines, one falling and one rising, which converge to form a wedge shape. This pattern indicates that the price of an asset is likely to break out in the direction of the falling trendline. In my understanding, "Continuous Weakness" means a shift away from selling towards buying. Sellers fail to hold the pressure, so buyers take the lead leading in D,E: MARKUP phases. Kind regards Artem Shevelev Please check out my older Education Ideas Consider put like and follow my page for more updates)
BITSTAMP:BTCUSDEducation
by ArShevelev
3