One could argue that identifying the right moment to place your order is the cornerstone of Forex trading.
Numerous technical analysis indicators, like OBV, MACD, and other oscillators, are designed specifically for that purpose. A Forex rising wedge pattern is another measure that can facilitate your trading performance.
Understanding Forex Rising Wedge
A rising wedge Forex pattern suggests the possibility of an uptrend reversal, i.e. the prices that have been rising are likely to fall soon. This typically occurs after the price breaks through the lower trendline or the support line. When you examine the Forex charts, the rising wedge pattern looks like this: the resistance line is marked by the highest price peaks. Then, the support lines drawn between the lowest prices are both rising as the price fluctuates less and less, and the support line is about to meet the resistance line.
The rising wedge is an indicator of the natural uptrend/downtrend alternation. Also, it is a marker of the market sentiment towards an asset. That’s why you should consider the circumstances when a rising wedge pattern usually occurs:
- Trading volume is going down. The combination of an increased supply and the decreasing trading volume might signal the weakening interest of investors.
- Price rise is slowing. It is one more proof that the demand for the asset has lowered. If it happens, when approaching a historical resistance level, the bearish signal is clear.
- Support line breakout. When the price drops below the support line, it indicates further price fall.
Helpful Cutting-Edge Technologies
Once you can clearly identify a stock rising wedge, you can reap the benefits. Your chances for success will depend on the correct timing of your order. To profit from a rising wedge, use Forex tools to achieve top-speed trading. For example, a VPS with latency as low as 0.5 milliseconds and an uptime of 99.99% will get you ahead of other traders. Forex VPS provides a dedicated IP-address, unlimited traffic, enterprise-class SSD storage. Besides, it is compatible with all Forex terminals, EAs, and brokers. An uninterrupted high-frequency trading goes on even when you’re offline.
Trading Strategies during a Rising Wedge
Now that you have all the machine advantage, let’s talk about helpful strategies that will make stock rising wedges highly lucrative for you:
- Enter the market with a price that is below the support line. Place a stop-loss order directly on top of the support line that was broken as it is likely to become a new resistance line.
- When you sell at the resistance price under the support line, place a stop-loss order above the new resistance line. It is a common approach. After the breakout, a sell order is typically placed below the support price line.
- One of the higher risk strategies is placing a sell order, when a previous support line becomes a new resistance line.
Trend Reversal vs Trend Continuation
Sometimes, a rising wedge does not indicate a bearish reversal but a bullish trend instead. To spot the difference, keep an eye on the following things:
- Resistance line breakout (not the support line).
- Short-term and shallow pullback within the support line.
- Increasing trade volume that also indicates a rising interest in an asset.
Having acquired proper tools, like a VPS, and having learned a variety of strategies, you can successfully identify a rising wedge pattern and turn it in your favor. If you predict the formation of the rising wedge, you can find the right moment to enter and exit the market and avoid losses. When scrutinizing the charts, keep in mind the general market sentiment as it may influence the prices greatly.
