Wedge Chart Formation - Pause In Current Trend

Definition of Wedge Chart Formation
\r
A Wedge Chart Formation is created when price fluctuations converge to a point on a straight line. There are two types of wedge formations: rising and falling. The wedge chart formation is not a trend reversal pattern, but only a temporary pause in the current trend. Volume in a wedge formation like other triangles, diminishes as the formation develops. In order to draw a valid wedge, the trend pattern must be compact with frequent price fluctuations and tightly bound lines that converge to a point.

Falling Wedge
\r
A falling wedge formation develops as price continues to converge to a point after falling rapidly. When price breaks out of a falling wedge, it drifts sideways or in a dull rounding bottom before the rally begins. Falling wedges are most common in bull markets, as they provide the fuel for the continuation of the primary trend.

Rising Wedge
\r
A rising wedge formation develops as price continues to converge to a point after rallying for a period of time. In many cases the price will rise to a clear apex, and in some cases, it will actually push through the top of the formation. However, once price breaks out of the wedge to the downside, they often begin to decline quite rapidly. Trading volume in a wedge follows the common rule of diminishing gradually as the price moves towards the apex. This is the one difference between rising and falling wedges, because remember with falling wedges the price action may drift out of the wedge before rallying sharply. Rising wedges are most common in bear markets, as they provide the fuel for the continuation of the primary trend.

See You At the Top,

mysmp.com

Al Hill is the co-founder of mysmp.com (My Stock Market Power) which provides free trading articles to investors.
\r
Please visit http://www.mysmp.com/ for more free articles.

Trend Lines - Identifying Existing Price Trends
Trend Lines - Overview Trend Lines are one of the oldest technical indicators. Trend lines are used to identify and confirm...

An Effective Web Tool To Create Animated Flash Charts For Your Webpage
Maintaining a website for business houses has become as much important as acquiring an office space these days. Internet has ...

Finding Chart Patterns That Can Lead To Big Profits
Professional traders have their own set of patterns and indices they use to predict the markets. Profitable traders are awar...

The HTML Color Chart - Do We Really Need This Anymore?
I'm surprised how many people today still rely on an html color chart to pick colors. Unfortunately, anyone who does a search...

Bedtime Battles - The Challenge of Sharing a Bed
Most couples spend more time in bed together than anywhere else. But with the average person moving 40-60 times during the ni...

Using Technical Analysis in Day Trading
Technical analysis describes different ways of predicting the future of the market you are trading.Technical analysis helps i...

5 Reasons To Step Away From A Trade
Volatile markets can send your positions into the negative. Indeed, bad trades frequently happen to good traders. Regardless ...

Day Trading Charts, Are They Any Good?
The mechanics of the market are constantly changing and this has resulted in people relying much more heavily on various algo...

What is Day Trading?
Day trading is the buying and selling of stocks, currencies, and commodities with the aim of making profits from the differen...

Day Trading Stock Picks
Day trading stock picks are the best stock deals that are available for day trading. Awareness regarding day trading stock pi...

How To Manage The Passion Of Trading
Being a trader is more than just a day job. Traders will often find themselves studying the numbers on unrelated events. Af...

Day Trading
Day trading is the most unpredictable and risky obsession in the stock market. Most of the investors might lose money when th...

Equivolume - Displays Price And Volume
Equivolume - OverviewEquivolume chart displays the relationship between price and volume in a bar. The top of the bar is the...

How To Break Out Of Your Trading Slump By Printing Out Charts Of Your Trades
If you happen to find yourself in the middle of a trading slump, take these day trading stock tips to help you turn it around...

Avoid Stress When Managing Exits to Futures Day Trading Positions
Traders spend most of their time researching setups for trade entry, using fundamental analysis, chart patterns, signals from...

How To Get 85-90% Winning Trades
There have been a lot of articles written about the high probability of winning trades when trading with the trend. Everyone ...

Are You a Nervous Trader?
Do Not trade with money you cannot afford to lose.What do you need to know in order to become an intelligent trader who can b...

Day Trading For A Living
I was reading an article today which maintained it is not possible to make money day trading. Naturally this piqued my intere...

Get Relief from Arthritis Pain Naturally
Arthritis is a common problem that literally means pain and inflammation in joints. Previously it was considered the problem ...

Yoga Wedges- Boosting Your Yoga Skills
Yoga is an all time medicine to every part of your body. It is very popular and has become an important part of our lives. It...