The opposite of the Rising wedge, the Falling Wedge pattern appears when the market is consolidating to decline with the Resistance line being steeper than the Support line. So, the high value (High) is always sloping faster than the low value (Low).
If this pattern forms during a downtrend, then the price has the potential to skyrocket back. If it is formed during an uptrend, the biggest possibility is that the price will continue to increase again.
What is the Falling Wedge Pattern Trading Strategy?
Planning trade execution based on the appearance of the Falling Wedge pattern can be done in a simple way. Even novice traders can use it as long as they follow the exact trading steps.
First, identify the formation of price patterns. This first step can be done on all types of Crypto Pairs and Timeframes, but it is recommended to learn on Major Pairs and Hourly to Daily Timeframes first until you get used to it.
The second step, confirm the signal from the Rising Wedge pattern or Falling Wedge pattern with the help of other indicators. Supporting indicators are useful for increasing the signal validity of wedge price patterns.
Third, set profit targets and loss limits. After you are sure of the validity of the trading signal, you need to determine at what level the position will be closed, and how much risk you are ready to bear if the price moves beyond expectations.
Generally, the profit target on the Falling Wedge pattern can be determined through the Range (distance) of the Low to High values at the beginning of the formation of the "slice" or the longest Range candle in the channel.
Next, the loss limit can be determined according to the Risk and Reward ratio or placed near the Support and Resistance limits.
The trading steps using the falling Wedge pattern above can still be developed or modified according to trading habits. For example, supporting indicators can be replaced with RSI, MACD, or other indicators that can identify at what level the trend will change.
