Forex Analysis in Rising and Falling Wedges

Forex Analysis in Rising and Falling Wedgesforex chart 18,100 18,100 CA$5.14 9/420=2.1%wedge pattern 1,600 1,600 CA$0.98 6/420=1.4%currency pair 3,600 3,600 CA$7.16 7/420=1.7%Word Count: 420

I consider Forex Charting as a form of art more than an exact science and the appearance of a wedge pattern proves it quite radically. A wedge pattern is very similar to both pennants and triangles, They mark a point of indecision or consolidation in the direction of the underlying currency pair. Opportunity?When a wedge pattern shows up in a downtrending currency pair, the forex chart will show two converging trendlines. When the convergence results in higher highs and higher lows, it is known as a rising wedge. In this instance it usually indicates that a downtrend is intact. The forex chart will let you visualize the final attempts by suppliers to move the price upwards as they hold onto the currency pair. But when demand at last fails to materialize, the downtrend will resume.When a currency pair is uptrending, a wedge pattern would once again be identified by its two converging trendlines. When this convergence results in lower highs and lower lows, its known as a falling wedge. In this case it will look like buyers are trying to move the price lower and lower until there are no traders left to supply the currency pair at these lower prices. This is when the uptrend continues. Forex chart analysts should take note, when a rising wedge appears in an uptrending market, its usually a sign that the partys over. And the same holds true when a falling wedge shows up on the forex chart of a downtrending currency pair in which case, shorts should be prepared for a trend reversal.Not very intuitive since most people will associate a falling pattern with a downtrend continuation and a rinsing pattern with an uptrending continuation. But for a wedge pattern to be a continuation indicator, it must show up in a forex chart as a retracement pattern-moving against the prevailing trend.Its also important to note that from a forex chart analysis perspective, some traders expect that a breakthrough will result in a move that would be equivalent to the height of the wedge when the pattern first forms.As you can see, the wedge pattern in a forex chart demonstrates many of the uncertainties around using forex chart analysis for trading a currency pair. From its similarities with other continuation patterns to its interpretation as being both a continuation pattern and a reversal pattern. Thats why its so important that you always use at least one other indicator to confirm any continuation or reversal pattern.