Trading strategy based on the figure of technical analysis of the wedge

Trading system based on the technical analysis of the wedge can be used for both position and intraday trading, depending on your favorite timeframe. The strategy uses varieties of of the Wedge price pattern: Upward wedge, Downward wedge and reversal candlestick formations.

Input parameters

• Currency pairs: any.
• Timeframe: any.
• Bidding time: any.
• Risk Management: After calculating the stop-loss, choose such a volume of the lot that the risk was no more than 2-5% of the deposit per trade.

Setting up the price chart

To trade on the trading strategy using the figures of technical analysis, a special template is not required, as it is unsyndicatorial. First you need to mark important support/resistance levels, then you can start looking for TA figures Rising and Downtrending Wedge.

What does the technical figure of the wedge look like

The figure of the wedge is somewhat similar to the triangle shape in the sense that it appears when the price chart narrows and the trend lines converge. The Wedge pattern can indicate both a continuation and a reversal of the market, and has a noticeable downward or upward slope. There are several methods of finding these TA patterns, one of which is shown below.

The figure below shows the Downtrending Wedge pattern. Note that the top line connects significant local highs and the line below connects significant local lows.

Using TA Wedge in the trading strategy

The principles of trading will be considered on the example of the Downward Wedge, when you open a long position.

You can enter the market in two ways:

• Aggressive method

The aggressive method involves entering the market on breakdown The upper boundary of the Wedge pattern. At the same time, you must have a sufficient deposit volume to wait out a possible pullback. The advantage of this approach is that if after a breakout, the price goes directly in the right direction without a pullback, then you will not miss an entry into the trade.

• Conservative method

The conservative method involves entering on a pullback after a breakout. However, in this case it is possible to skip a trade if the market has high volatility and the price moves without a pullback.

An additional confirmation signal to enter the trade can be a reversal combination of candles.

• Stop-loss is placed 15-20 points below the lower border of the wedge.
• The size of the take profit is equal to twice the distance between the wedge borders.
• It is possible to exit a trade when a reversal combination of candles appears, if the price has not yet reached the take profit level.

According to the experts of ForTrader.org magazine, the figure of technical analysis wedge occurs quite often on the price charts of currency pairs. Since the trading strategy is non-syndicator and is based solely on the rules of technical analysis, its effectiveness will be somewhat higher than strategies based on indicators.

Trading strategy based on the figure of technical analysis of the wedge has an additional advantage. This is due to the fact that the identification of the TA Cline figure does not cause as much difficulty as determining, for example, figures Head and shoulders or Gartley harmonic patterns.

Learn more about technical analysis figures and price patterns

Other trading strategies based on price patterns