What Are Falling Wedge Patterns and How Trade Them?

When combined with the rising wedge pattern, it makes a significant pattern that indicates a shift in the direction of the trend. Generally, a falling wedge is seen as a reversal, though there are instances where it might help a trend continue rather than the reverse. A wedge pattern refers to a trend of the market on an analysis chart which is often observed while trading assets, such as bonds, stocks, crypto, etc. This pattern is distinguished by a narrowing price range combined with either an upward (rising wedge) or a downward (falling wedge) price trend.

As a reversal pattern, the falling wedge slopes down and with the prevailing trend. Regardless of the type (reversal or continuation), falling wedges are regarded as bullish patterns. The descending wedge pattern appears within an uptrend when price tends to consolidate, or trade in a more sideways fashion.

How to trade a Rising Wedge classical pattern?

In a rising wedge, both boundary lines slant up from left to right. Although both lines point in the same direction, the lower line rises at a steeper angle than the upper one. Prices usually decline after breaking through the lower boundary line. As far as volumes are concerned, they keep on declining with each new price advance or wave up, indicating that the demand is weakening at the higher price level. A rising wedge is more reliable when found in a bearish market. In a bullish trend what seems to be a Rising Wedge may actually be a Flag or a Pennant (stepbrother of a wedge) requiring about 4 weeks to complete.

Traders ought to know the differences between the rising and falling wedge patterns in order to identify and trade them effectively. When a security’s price has been falling over time, a wedge pattern can occur just as the trend makes its final downward move. The trend lines drawn above the highs and below the lows on the price chart pattern can converge as the price slide loses momentum and buyers step in to slow the rate of decline. Before the lines converge, the price may breakout above the upper trend line. The trend lines drawn above and below the price chart pattern can converge to help a trader or analyst anticipate a breakout reversal.

What’s the difference between the falling wedge pattern and the descending triangle pattern?

Both scenarios contain different market conditions which must be taken into consideration. Hello dear traders,
Here are some educational chart patterns you must know in 2022 and 2025. We are new here so we ask you to support our views with your likes and comments,
Feel free to ask any questions in the comments, and we’ll try to answer them all, folks. If the rising wedge forms after an uptrend, it’s usually a bearish reversal pattern.

Clients must consider all relevant risk factors, including their own personal financial situation, before trading. Trading foreign exchange on margin carries a high level of risk, as well as its own unique risk factors. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses.

Trading the Falling Wedge Pattern

When a stock or index price move has fallen over time, it can create a wedge pattern as the chart begins to converge on the way down. Traders can look to the beginning of the descending wedge pattern and measure the peak to trough distance between support and resistance to spot the pattern. Traders can make use of falling wedge technical analysis to spot reversals in the market. The USD/CHF chart below presents such a case, with the market continuing its downward trajectory by making new lows. Price action then start to trade sideways in more of a consolidation pattern before reversing sharply higher. Traders can look to the starting point of the descending wedge pattern and measure the vertical distance between support and resistance.

As we previously discussed, the falling wedge pattern can be formed after a prolonged downtrend or during a trend. Or, in other words, it may indicate a trend reversal or trend continuation. To identify a falling wedge pattern, the first thing you need to find is a price consolidation after a downward trend. Then, you need to identify two lower highs and two (or three) lower lows. A falling wedge is essentially the exact opposite of a rising wedge. So it also often leads to breakouts – but while ascending wedges lead to bearish moves, downward ones lead to bullish moves.

What is the Falling Wedge Pattern?

You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money. Here, we can again turn to two general rules about trading breakouts. The first is that previous support levels will become new levels of resistance, and vice versa. Another common signal of a wedge that’s close to breakout is falling volume as the market consolidates. A spike in volume after it breaks out is a good sign that a bigger move is on the cards.

Traders can use trendline analysis to connect the lower highs and lower lows to make the pattern easier to spot. A break and close above the resistance trendline would signal the entry into the market. In the Gold chart below, it is clear to see that price breaks out of the descending wedge to the upside only to return back down. This is a fake breakout or “fakeout” and is a reality in the financial markets.

How accurate is the falling wedge pattern?

It is a type of pattern development in which trade operations are limited to convergent straight lines, thereby making a pattern. The wedge normally requires roughly 3 to 4 weeks to finish its formation. This formation has a tilted slant that rises or falls in the same way. The Falling Wedge in the Uptrend indicates the continuation of an uptrend. The Rising Wedge in the downtrend indicates a continuation of the previous trend. A rising wedge formed after an uptrend usually leads to a REVERSAL (downtrend) while a rising wedge formed during a downtrend typically results in a CONTINUATION (downtrend).