Understanding the Rising Wedge Pattern and How to Use It When Trading
The rising wedge pattern is one of the terms that you must understand. It is a chart pattern used to perform technical analysis. By mastering the rising wedge pattern, OctoMate can see the ability of price retrogression in a legacy.
Then, what is the method of using it? So that you don't hesitate, let's follow the full review starting from the interpretation, advantages, disadvantages, to tips in trading.
What is the Rising Wedge Pattern?
Rising wedge pattern is one type of pattern in technical analysis of chart patterns. This reversal pattern provides an estimate of price movements, where after the arrival of a price there will be a possible decline. By mastering this pattern, you as a trader can identify the goals and distance of the next price movement.
Basically, the rising wedge pattern is a pattern that is created when the price is moving up, where the price consolidates between the support line (basic line) and resistance (upper line) to produce an upward sloping force. This pattern is also often known as a bearish situation.
There are also important characteristics that characterize this pattern, including:
- There are 2 lines of force, namely converging support and resistance
- Price action while trading in an uptrend (higher high and higher low)
- There is a decrease in loading capacity when the wedge moves towards the breakout
Types of Rising Wedge Pattern
This pattern is also divided into 2 types, namely reversal and continuation patterns. Next is the explanation.
1. Pattern Reversal
The reversal pattern itself is a pattern that is created sloping upwards and explores a legal or bullish style.
2. Continuation Pattern
Meanwhile, continuation or connection patterns are patterns that are created when the price is in a bearish situation where it is about to go up, but the slope is against the legal downtrend.
Comparison of Rising Wedge and Falling Wedge Patterns
The rising wedge pattern is different from the falling wedge. The falling wedge pattern usually occurs when the market is consolidating between two converging support and resistance lines, which is indicated by a pattern that then expands at the top and contracts when the price moves down.
The key comparison, the falling wedge pattern is a sign that the price is about to be bullish. In contrast to the rising pattern in the price movement of the legacy, which proves that the adrift price is about to face bears.
Strengths and Weaknesses of the Rising Wedge Pattern
One of the advantages of the rising wedge pattern is its ability to prove that there is a movement of style goals that will soon occur, so that you can also recognize or take into account price changes.
However, this pattern must also have weaknesses, where the rising wedge pattern is a marker that technically only provides a sign. That is, OctoMate needs to use other markers in order to clearly identify the market situation and the movement of its costs. Because, this pattern is in fact not always able to accurately account for style changes.
Trading Guide with Rising Wedge Pattern
Remembering the advantages and disadvantages above, here are some trading guidelines using the rising pattern. One thing that you should pay attention to is the movement and pattern of the price of the legacy that you want to trade. As an initial step, try monitoring and recognizing the pattern.
The trick is to justify the relic trading load capacity. The price of legacy that then rises accompanied by a decrease in trade capacity basically has a great ability if there is to be an immediate price retrogression.
If you manage to recognize it, then look at various other trade elements, ranging from the accuracy of the duration to enter or open a position, stop loss, or also the risk of loss or profit. At the same time, don't forget to keep an eye on the trade load.
Before opening a trading position, you should confirm the pattern by waiting for a breakout to occur first. If the price crosses the upper force line during the descending movement, OctoMate is recommended to open a position or buy a hold. However, if the price breaks the bottom line of the uptrend, you will have to sell the holdout or close the position.
Thus a review of what the rising wedge pattern is, its types, advantages, disadvantages, and trading methods when this pattern was created.
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