Top 10 Patterns ( Wedge Patterns ) #3

Example on daily Aud/Jpy pair of a Wedge Pattern ( can be falling wedges and on any time frames):

Wedge patterns are of two types, falling wedge as well as the rising wedge. While the falling wedge is associated with bullish reversals, the rising wedge is seen as a bearish reversal indicator.

The wedge pattern has over three properties that a trader needs to look for if hunting for it on their charts.

Converging trend lines.
Decline in volume while the price is progressing through the pattern.
A breakout from any of the trend lines.

You can spot the rising wedge, usually when a currency's price has been climbing over a reasonable period. However, they have been known to form during a currency price's downward trend as well.

As for the falling wedge, it has been observed to form correctly when a currency's price has been on a decline for a while. The pattern's hot spot is just when the market trend is in its final plunge.

Of the two, the falling wedge has been noted to be more reliable than the rising wedge in terms of predicting the market's price trend.