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  1. #1
    Trader tfs2012's Avatar
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    Lightbulb chart patterns (reversal wedge pattern)

    Definition of the wedge pattern
    This pattern is composed of price waves moving in the form of a narrowing range in an ascending or descending angle
    and it may be a corrective or reversal pattern
    When the pattern appears at the end of a down trend it is called "falling wedge"
    When it is at the end of an up trend it is called "rising wedge"




    How do you trade this pattern?

    You have to wait until the price breaks out of wedge You can then sell or buy directly or wait for the price to return to test the pattern

    Stop Loss
    The safest place to place a stop loss is under or above the last wave of the pattern

    Take profit
    There is more than one way to determine the take profit
    -You can take the length of the first wave of the pattern and project it at the breakpoint and this will give you your target
    -The support and resistance levels of the pattern can also be considered as targets

    Confirmations
    For me, the best thing is to have a divergence at the end of the pattern with the MACD
    Example

    this is an example for the "falling wedge" on the eur / cad


    Attachment 28847

    you can know more about divergence here How-do-I-use-Divergence-in-my-trades

    also, you can check out the head and shoulders pattern here chart-patterns-(head-and-shoulders)

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  2. #11
    Trader J_C_Anderson's Avatar
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    To my mind, price patterns are great tools to make trading decisions. The main advantage of price patterns is that they are applicable to any market or instrument, in any market conditions. This means that if you will find interesting information on chart patterns developed for commodities market, you can easily use them for trading Forex (in fact, almost all chart patterns were created either for stocks or for commodities).
    Another important aspect is that they work the same way on all timeframes. So, if you have the pattern that works for you, you can apply it both on M5 and D1 charts. This creates great opportunities for scaling: when you have a pattern, you can start to use it on higher timeframes with higher positions. At the same time, it is important to define the right stop to keep the risk reward ratio. Sometimes it is quite difficult to define the right stop level for chart patterns, so the general rules of placing stops could be applied.
    After a few years of trading you will create your own collection of chart patterns that work best for the markets and instruments you are trading. This will help you to improve your trading performance and increase your profits substantially.

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