Continuation Technical Pattern - Wedge

1. What is a wedge

As the coin price fluctuates in a narrower range, we connect the trough to the trough, then peak to the peak, then we can get two straight lines that increasingly get closer as they extend in the same direction. Finally, a pattern shaped like a wedge forms, so we call it a wedge pattern.

Wedges are divided into ascending wedges and descending wedges.

• Ascending wedge

• Descending wedge

2. How to identify a wedge

In terms of its geometric shape, a wedge resembles a triangle. However, the difference between the wedge pattern and the triangle is that the two lines of the wedge slope are in the same direction.

• Ascending wedge

1. It generally appears in a rising trend.
2. At each bounce, it rises to a peak lower than the previous peak and then falls to a trough lower than the previous trough.
3. The overall trading volume is gradually shrinking.

• Descending wedge

1. It generally appears in a downward trend.
2. At each bounce, it rises to a peak higher than the previous peak and then falls to a trough higher than the previous trough.
3. The overall trading volume is gradually shrinking.

3. What does wedge say?

If the upper line of the wedge is pieced, it indicates a bullish market and suggests investors go long. If the wedge is crossed at the lower line, it indicates a bearish market and suggests investors go short.

4. Application

1. If the upper line of the wedge is pieced, it indicates a bullish market and suggests investors go long.

1. If the wedge is crossed at the lower line, it indicates a bearish market and suggests investors go short.

5. Use in BTC trading

• Ascending wedge

The picture above is the daily chart of Gate.io contract BTC/USDT. From June 1, 2020, to November 1, 2020, the coin price first rose, then started to fluctuate in the range, where an ascending wedge was formed. Subsequently, the price soared to cross the upper line of ascending wedge at $11,000 and then started a new round of strong rises. It rose to as high as $20,000, with an increase of up to 107%.

• Descending wedge

The picture above is the daily chart of Gate.io contract BTC/USDT. From May 5, 2022, to June 18, 2022, the coin price first slumped and then fluctuated in the range, where a descending wedge was formed. After the price broke the lower line of the wedge at $29,500, it kept going down all the way to as low as $17,800, at a drop of up to 42%.

6. Summary

How to use wedges, flags, and triangles to predict the trend and act wisely in trading? The general principle is: when the upper line of the pattern is crossed, go long. If the lower line is crossed, go short.

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Disclaimer

This article is for informational purposes only and does not constitute any investment advice, nor is Gate.io responsible for any of your investments. Content related to technical analysis, market judgment, trading skills, and traders’ sharing cannot be used on an investment basis. Investment may involve potential risks and face uncertainties. This article does not contain or imply any guarantee for returns on any type of investment.