This chart pattern can be formed after either an uptrend or a downtrend. Bulls make the first move by creating a resistance and pushing the exchange rate upwards. As bears try to fight back, it looks like the bulls have the upper hand as higher lows and higher highs are being formed. However, bears suddenly start a downtrend by breaking the wedge’s lower border resistance that was created by the bulls.
Before the breakout, 4 touches to the wedge’s upper and lower borders are the minimum for a valid pattern, more touches are acceptable.
For the pattern’s shape to converge, the up-slope of the wedge’s lower border (1-3-…) must be considerably sharper than that of the upper border (2-4-…). However, it is acceptable for a pattern to form without both borders intersecting in the near future, the key point is that the wedge’s lower border up-slope must be sharper than that of the wedge’s upper border.
This pattern is commonly found on all time frames.
Entry: after breaking the wedge’s lower border at point (9), either with an entry after the breakout, or after a possible retest of the lower border’s breakout rate.
Take profit: identified by measuring the vertical distance between the first resistance (1) and the first support (2), that measurement is then applied from the breakout rate (9)
Stop loss: can either be the breakout rate (9), or the last touch to the wedge’s upper border (8) before the breakout