The graphical analysis of most of the models (templates or patterns) have names that come from visual association. One such example is the model of the wedge. By the name you can see that this model has the form of a wedge, and it is most often compared to the other models, is found in the forex market. The creator of this model is unknown.
Description of the wedge
Wedge - This narrows fluctuations chart boundaries that are wedge shape. The boundaries of the wedge are the support and resistance lines. Wedge can be two or more waves, it does not matter.
There are three types of the wedge: upward, downward and lateral.
Rising wedge. Rising Wedge At each local maximum above the previous one and each local minimum above the previous. Now let us consider the model of the rising wedge (look at the photo). Our model is a wedge of three waves. The third and final wave, formed a break of the lower boundary and automatically generate a signal to sell the instrument. In case you make a mistake in determining the breakdown point (because it can form a wedge fourth wave) set spot warrant two points above the breakout point.
Falling Wedge. Falling wedge In each local minimum below the previous one and the new local maximum below the previous one. Our model consists of three full-wave, and the maximum of the fourth wave formed breakthrough upper boundary of the wedge. Breakout point is the point of opening a position to buy. As in the case with the rising wedge, insure themselves stop order.
Tips and conclusions
In the first wave of the wedge is the largest and therefore the last wave of the smallest and most of the boundaries of the wedge breakout happens when the last wave is 3/4 in the first wave. Also, if the price moves in the wedge, often the price is outside of the wedge, but it does not break (false breakout, look smaller time frames), and the volatility of the market, so be alert and pay attention to the first board. When the side wedge, then enclose a warrant at a strong break boundaries, and remember that the more the wedge, the greater the movement after the break.
Wedge one of the key figures in the graphical analysis, which can often be found on the forex market. For a trader, it is important to be able to calculate the top and local minima in the graph, and only then look for chart patterns.