The very first thing that needs to happen before you should even think about trading one of these patterns is a confirmed break. Not only does it take patience to spot a favorable pattern, but it also takes an extra dose of patience to wait for the pattern to confirm and secure a good entry. And that assumes you’re consistently scanning for these formations and trading a couple of dozen currency pairs. On average, you may only find one tradable wedge pattern each month. It’s because broadening wedges are less common than their narrowing counterpart. I would argue that these price structures require more patience than some of the other strategies and patterns we utilize. Like every trading strategy we use here at Daily Price Action, trading broadening wedges takes patience. Shortly after closing below support the pair declines by 104 pips, which is the profit potential that we’re after. The NZDUSD 1-hour chart above shows a wedge at the top of a range. But know that it can also trigger a bullish reversal if found at the bottom of a range.īefore we move on, let’s take a look at the broadening wedge in action. With this in mind and for purposes of this lesson we’ll be referring to the formation as a bearish reversal. On that note, when it comes to the Forex market, I’ve noticed that the broadening wedge develops at the upper end of a range far more often than at the bottom. These characteristics are the same regardless of whether the wedge forms at the bottom of a downtrend or the top of an uptrend. What makes it a “broadening” pattern is, of course, the fact that the two levels are further apart at the end than they are at the beginning. Notice that we have a support and resistance level as well as the price action that forms the consolidation. The image below illustrates the characteristics of the formation. Instead, it signals that buyers or sellers are becoming exhausted and that a reversal of some sort is the likely outcome.
While it is a consolidation pattern, it doesn’t represent what we often refer to as “healthy” consolidation. Unlike its inverse, the narrowing wedge, the broadening wedge “fans out” from left to right. The structure can form sideways without a clear directional bias or in an ascending or descending fashion. The broadening wedge pattern is similar to the upward and downward sloping flags in that it represents exhaustion by either buyers or sellers.
0 kommentar(er)
