The expiration date is not that difficult to be set because of the fact that the first move is a fake one. That is correct.īut one should keep in mind that wedges are not that simple to trade and if, only if, after the 2-4 trend line is broken, market is retracing back into the wedge and makes a new high (in the case of a rising wedge) or low (in the case of a falling wedge), then BUY contracts / CALL options in the first instance and SELL / PUT CFDs in the second one should be traded. Traders are looking in a regular wedge, for the 2-4 trend line to be broken before buying after a rising wedge and call options after a falling wedge. The thing is that traders are looking for a rising wedge to always break lower which is not really the case as if it is a triangle, after the b-d trend line is broken market is not going to look back. This makes the triangle to have the wedge looking like shape and gives the opportunity to be a contrarian. In order to have the shape of a wedge, the triangle is called a running one, as last wave, wave e, is really small.

If your count is corrective, namely it is labeled with numbers and not with letters, then chances are, your so-called wedge is a triangle. The tricky part with this wedges is that they are actually triangles and the only difference represents the place where they are forming. If that is true, then your count is wrong as overlapping is not allowed in a first wave wedge looking like move. In this instance, the thing that gives a clue regarding the first wave is to look to see if the 2nd and the 4th wave in the wedge are overlapping. In this case, what a trader needs to do is to take a Fibonacci retracement tool and measure the whole wedge, and starting with the 38.2% retracement level to start buying if the previous wedge was bullish and selling if the previous wedge was bearish as it means the wedge was a first wave in an impulsive move that should continue in the same direction. It is being said that if a wedge is forming at the end of a new move than that wedge is not going to retrace more than 50% of the whole distance from the beginning of the wedge until the end of it. Wedges are patterns that form mostly at the end of an impulsive move or at the end of a trend but they also can form at the very start of it. However, if you do that, but the you see price coming back and taking the higher values of the wedge, make sure you understand that the wedge is actually going to explode higher and one should reverse the trade and BUY! Falling Wedge Pattern Rules These triangles are extremely vicious because the normal reaction of market participants would be, for example, to sell the moment when the 2-4 trend line in a rising wedge is broken. That kind of triangle is called a running variation of a contracting triangle and the fact hat the word running appears means that the pattern will end above/below the previous wave’s end. There is a special type of triangular consolidation that just makes the wedge look like, not a reversal pattern anymore, but actually makes a rising wedge exploding higher and a falling wedge to just slip to even more lower levels.

However, is this valid all the time? Well, the answer is no. A falling wedge is rising and a rising wedge is falling, says the book. Also important – what is the possible the outcome of a wedge. There should be no trader in this world who does not know what a wedge is and how it looks like.

Wave count falling wedge