Wedge Patterns: Rising and Falling Wedges and Trend Exhaustion
Just like the triangle pattern,
a wedge pattern is built from two converging trendlines.
The key difference:
- A triangle usually forms around a relatively fixed price area,
acting as a sideways compression zone. - A wedge moves with the trend while
highs and lows converge in the same direction as that trend.
So a wedge often summarises:
“Price keeps moving in the same direction,
but the underlying pushes are getting weaker.”
That is why wedges are frequently associated with trend exhaustion.
The diagram below compares two common situations:
- Left: a rising wedge after an uptrend, breaking lower
- Right: a falling wedge after a downtrend, breaking higher
As you can see, wedges:
- lean in the direction of the prior move, but
- often break out in the opposite direction.
Of course this is not guaranteed –
in some contexts wedges also resolve as trend continuation patterns.
1. Basic Wedge Structure
We usually distinguish two types:
- Rising Wedge
- Falling Wedge
1-1. Rising Wedge
A rising wedge has:
- Both highs and lows moving higher, but
- the highs rise more slowly than the lows,
- so the two trendlines tilt upward and converge.
This means:
- Price is still going up,
- but each new push higher is less powerful than the last.
From the swing-vs-correction perspective,
- it is often a corrective structure after a strong upswing,
where the market is grinding higher but losing momentum.
1-2. Falling Wedge
A falling wedge is the mirror image:
- Both highs and lows move lower, but
- the lows fall more slowly than the highs,
- so the trendlines tilt downward and converge.
This reflects:
- Ongoing downside movement,
- but each new leg lower shows less downside force.
Near the end of a downtrend, especially around
important support from s-r,
a falling wedge can act as a potential reversal candidate.
2. Continuation vs Reversal: Why Context Matters
Textbooks often summarise wedges as:
- Rising wedge → bearish reversal
- Falling wedge → bullish reversal
In live markets it is more nuanced.
2-1. Rising Wedge: Not Every Wedge Is “The Top”
Seeing a rising wedge does not automatically mean:
“This is the exact top, a major crash is coming.”
In reality, you will see plenty of cases where:
- a rising wedge appears mid–uptrend,
- price breaks down briefly,
- then quickly reclaims resistance from
s-r and
extends the uptrend.
However, a rising wedge deserves more respect when:
- It forms after a long advance,
right under a higher-timeframe resistance. - Volume diminishes inside the pattern
(fewer eager buyers on each push). - Volume expands on the breakdown,
showing that sellers are stepping in.
2-2. Falling Wedge: Not Every Wedge Is “The Bottom”
Similarly, a falling wedge:
- can be a bullish reversal pattern, but
- inside a strong downtrend it may lead only to a short-lived bounce,
followed by new lows.
The pattern becomes more meaningful when:
- The downtrend has already run for a while.
- The wedge forms near a well–tested support zone.
- The breakout above the wedge comes with
clear volume expansion. - The broken trendline holds as support on a retest.
3. Wedge Patterns and Volume
Volume is especially useful when reading wedges.
3-1. Inside the wedge: gradual contraction
As covered in volume:
- Inside a wedge, volatility tends to shrink, and
- volume commonly drifts lower during that compression.
This is the market’s way of saying:
“We’re not as excited as before;
we’re waiting for a clearer decision.”
3-2. At the break: does volume expand?
A breakout or breakdown is more likely to “stick” when:
- The breakout candle closes clearly outside the wedge, and
- volume is meaningfully above recent average.
On the other hand, if:
- volume is modest on the break, and
- the move back into or through the wedge
shows stronger volume,
the original break may have been a fake move, and the real trade
is in the opposite direction – which ties into
breakout-fakeout.
The diagram below compares two scenarios:
- Left: a rising wedge that breaks down normally with expanding volume
- Right: a rising wedge that briefly breaks up, then fails and sells off
When the wedge breaks in the trend direction with weak volume
and then fails with stronger opposite volume,
you often have the ingredients of a trap.
4. Wedge Failures and Traps
Many traders remember wedges as much for their failures as for the clean patterns.
A common bullish trap around a rising wedge looks like this:
- Price pushes slightly above the wedge ceiling.
- The breakout candle does not get far from the boundary on a close.
- Price quickly returns inside the wedge.
- It then accelerates through the opposite side,
printing heavier volume on the move down.
In this case, the market:
- first pulls in late longs on the fake breakout, then
- unwinds them aggressively in the opposite direction.
We treat these failures and traps more systematically in
failure,
across wedges, triangles, and other patterns.
5. Practical Wedge Checklist
When you think you see a wedge, run through this checklist before trading it:
-
What is the higher-timeframe trend?
- On the daily / 4h, are we up, down, or sideways?
- See timeframes.
-
Where in the swing is the wedge?
- Early, middle, or late in the move?
- Refer to swing-vs-correction.
-
Is it rising or falling?
- Are highs and lows both moving up or both moving down?
- Which side (up or down) looks progressively weaker?
-
What do the breakout close and volume say?
- Does the breakout close cleanly outside the wedge?
- Is volume expanding or not?
-
What is your failure scenario and stop level?
- At what price do you consider the wedge idea invalid?
- Can you accept a stop there within your
risk-management rules?
Once you’re comfortable reading wedges,
- move on to more direct reversal structures like
double-top-bottom, and - study how failed patterns and traps behave in
failure.
Together with the triangle material,
this will give you a more three-dimensional view of
trend, exhaustion, and reversal risk on the chart.