3/10/2024 0 Comments Ascending wedge bullish or bearishThis is when the price breaks out of the wedge in one direction, only to reverse and move back inside the wedge. However, beware of bull and bear traps (aka "fakeouts" or "head fakes")Īscending and descending broadening patterns are difficult to trade because they are prone to fakeouts. Your profit target points can be found by taking the height of the pattern and adding it to the entry price. The rule of thumb is to wait for the price to break the trendlines before taking a position. The next step is to identify an entry point for your trade. Once you have identified this series, you will then need to look for the divergence between the highs and lows. This can be seen on a price chart as a series of peaks and troughs that are all moving in the same direction. The first step in identifying this pattern is to look for a series of highs and lows. Third, the formation can take a long time to develop, which can lead to frustration for traders who are trying to trade it. Second, it is difficult to spot on a chart. Trading Strategyīroadening wedges are difficult to trade for a number of reasons.įirst, the pattern is prone to false breakouts. The target for this trade could be the same as the height of the wedge.Ī long breakout candlestick shows that bearish sentiment was gaining momentum, and a strong downtrend was likely to follow.Įven if this is an ideal setup for a short position, don't forget to place a stop loss to limit your risk in case the market goes against you. We would enter the market when the broadening wedge breakout occurred. Now let's dive into some variations of the broadening wedges. This pattern can take a long time to form, so patience is your key to success. The break-out from the wedge formation is often accompanied by an increase in trading volume, which can confirm the strength of the move. This shift typically occurs after a period of consolidation or range-bound trading. The extending pattern is created when there is a shift in the balance of power from the bears to the bulls.
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