Wedges are common chart patterns where price squeezes between two converging trend lines that both slope the same way. They hint at a coming reversal or continuation — once you know how to read them.
The two wedges
- Rising wedge — both trend lines slope up, but converging. Despite the upward slope, it's usually a bearish signal: buyers are losing momentum, and a break below the lower line often follows.
- Falling wedge — both lines slope down and converge. It's usually bullish: sellers are tiring, and a break above the upper line often follows.
The counter-intuitive part: the wedge's slope and its likely resolution are often opposite.
Why they form
The converging lines show the range tightening — momentum fading even as price drifts. Eventually one side gives way.
How to trade them
- Trade the break, not the squeeze — wait for a decisive close beyond the wedge line.
- Confirm with volume — genuine breaks usually carry participation.
- Target — a common estimate is the height of the wedge projected from the breakout.
- Stop — just back inside the wedge; if price re-enters, the break failed.
The caveat
Wedges are subjective to draw and they fail often. Treat them as a hypothesis confirmed only by the break, and keep risk defined with the risk/reward calculator.
A wedge is momentum quietly running out. The breakout direction — often against the slope — is the tell.
Education only — not financial advice.