In this graphic, the blue line represents the line of resistance for the price highs, while the orange line marks the line of resistance for price lows. In the EUR/USD chart below, a falling wedge develops over a period of roughly 40 days, preceding a breakout that sees the currency pair gain in price for several weeks: While individual results can always vary from one trade to the next, ascending wedges are more likely predictors of a bearish breakout, while falling wedges have a stronger correlation with a bullish breakout. Typically, this convergence is viewed as a period of price consolidation likely to produce a breakout in one direction or another. These trend lines are drawn between the high points and low points of a currency pair’s price over a set interval, typically between 10-50 periods. What is a wedge pattern?Ī wedge pattern is a triangle-shaped chart pattern formed when lines of support and resistance converge. Here’s an overview of how the wedge pattern can be used in your forex trading strategy as well as how to plan trades that minimize risk and maximize potential profit. But while these patterns are easy to identify on a chart, the best practices for trading around them can be a little more complicated and dependent on your overall trading strategy. Wedge patterns are popular for their ease in analyzing on a chart as well as their proven value over time in predicting future price breakouts on the forex market. Of the many different chart patterns used to predict price behavior for forex currency pairs, wedge patterns are one of the most commonly used patterns.
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