![]() In 21% of cases, the price makes a pullback in support on the descending broadening wedge’s resistance line.ĬASE 2: formation of a descending broadening wedge after a peak In 60% of cases, a descending broadening wedge’s price objective is achieved when the resistance line is broken. In 75% of cases, a descending broadening wedge is a reversal pattern. ![]() Statistics of the descending broadening wedge after a bullish movement NB: often, the steeper the descending broadening wedge’s trend lines, the faster the price objective is reached. The price objective is determined by the highest point at which the descending broadening wedge was formed. The break in the resistance line definitively validates the pattern. This type of pattern appears on the troughs, it is a bullish reversal pattern. A third wave forms afterwards but the sellers lose control again after the formation of new lowest points.ĭuring the formation of a descending broadening wedge, volumes do not behave in any particular way but they increase strongly when the support line breaks.ĬASE 1: formation of a descending broadening wedge after a trough A second wave of decline then occurs of more magnitude, signalling the sellers' loss of control after a new lowest point. The highest point reached during the first correction on the descending broadening wedge’s resistance line forms the resistance. The sellers manage to make the price rebound on the resistance line but lose control after the formation of a new lowest point. The divergence of the two lines in the same direction (increase in price magnitude) informs us that the price continues to fall with movements that are increasingly low in magnitude. This implies that the descending broadening wedge pattern is considered valid if the price touches the support line at least 3 times and the resistance line twice (or the support line at least twice and the resistance line 3 times).Ī descending broadening wedge does not mark the exhaustion of the selling current, but the buyers’ ambition to take control. NB: a line is said to be "valid" if the price line touches the support or resistance at least 3 times. The upper line is the resistance line the lower line is the support line.Įach of these lines must have been touched at least twice to validate the pattern. It is formed by two diverging bullish lines.Ī descending broadening wedge is confirmed/valid if it has good oscillation between the two upward lines. How to trade descending broadening wedge?Ī Trading strategy consists of entry, stop loss, take profit level, and risk management techniques.A descending broadening wedge is bullish chart pattern (said to be a reversal pattern). So, it is also an indication of a trend reversal. Now a bullish trend reversal will happen.īut before a bullish trend reversal, market makers will eliminate the retail buyers by giving false breakouts. And the price is already in oversold conditions because of consecutive lower lows. For example, the last wave of the descending broadening wedge pattern will be the greatest compared to previous ones.īecause the market has eliminated the retail traders by big price moves against their direction. But before taking a decision, they will eliminate the retail traders. So, when the price makes lower lows, and every upcoming wave will be greater than the previous wave, it is understood that the price will take a big decision. They will buy when you sell a currency or asset, and they will sell when you buy a currency or an asset. It is understood that institutional traders always capture the stop losses of retail traders. Look at the image below for a better understanding. These are the simple criteria to identify this pattern on the price chart. There must be at least three waves in the descending wedge pattern.The starting point of this wedge pattern should be thin, and the ending point should be thick.Draw two trendlines meeting the swing high and swing low points of waves.Each upcoming wave should be greater in size than the previous wave.The price wave should make lower lows and lower highs. Identify the starting point of the wave.To find out this pattern on the chart, follow the following steps: In the case of descending broadening wedge, the starting point will be a narrow end, and the ending point will be a thick end because it shows the expansion of the price wave. A wedge is a structure or pattern with one thick end and one thin end. ![]() How to identify descending broadening wedge pattern?ĭescending broadening wedge is a type of wedge pattern. ![]() In this article, you will learn the descending wedge pattern in complete detail with a trading strategy. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |