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A wedge pattern is a market trend which can be formed at the top or bottom. The pattern is characterized by a contracting range in prices coupled with an upward trend in prices (known as a rising wedge) or a downward trend in prices (known as a falling wedge).  

It is a type of formation in which trading activities are confined within converging straight lines which form a pattern. It should take about 3 to 4 weeks to complete the wedge.

Rising Wedge

A rising wedge in an uptrend is considered a reversal pattern that occurs when the price is making higher highs and higher lows. A rising wedge in a downtrend is a temporary price movement in the opposite direction (market retracement). The price is confined within two lines which get closer together to create a pattern. This indicates a slowing of momentum and it usually precedes a reversal to the downside.

In the daily chart, we can understand that rising wedge marks the exhaustion of the buying trend. The convergence of the two lines in the same direction (a decrease in price magnitude) tells us that prices continue to rise with lower and lower movement magnitude. Buyers find it increasingly difficult to get the price to rise above the support line. The lowest point reached during the first correction on the rising wedge’s support line forms the support. A second wave of increases then occurs, but of a lesser magnitude, signaling an inadequacy of buyers. A third wave is then formed but the prices increase less and less in contact with the support. Volumes are then at their lowest point and decrease as the waves increase. The movement then has almost no buying power, which leads to a bearish reversal.

The short entry will be triggered as long as the market trend goes below the support level, which is the confirmation of the rising wedge pattern. Finding a stop loss is necessary, but hard, especially