Rising Wedge Pattern: How To Trade In Crypto With Rising Wedge ?

Many technical crypto traders prefer the rising wedge pattern as a chart formation because of its simple entry and exit criteria. The rising wedge’s distinctive formation can help traders predict an impending top and turn prices around.

The rising wedge is challenging to identify in real time because it appears on all chart time frames and can develop quickly. This blog walk you through the pattern’s appearance and its use in creating sell signals.

What is a rising wedge chart pattern?

A technical indicator known as a rising wedge suggests a reversal pattern frequently seen in bear markets. This pattern appears on charts when the price rises and the pivot highs and lows converge toward the apex, which is a single point. Declining volume can indicate a trend reversal and the continuation of the bear market when it coincides.

A bearish chart pattern called a rising wedge chart is formed by the convergence of two trend lines. One of the trend lines connects the most recent lower and higher highs, and the other connects the most recent lows. The resultant form resembles an upwardly angled triangle. A falling wedge pattern is the antithesis of a rising wedge pattern.

The low surpasses the high, and the lower supporting trend line is steeper, so the rising wedge pattern can be interpreted as a bearish wedge. The only differences between the falling wedges, despite having a similar shape, are the angle of the triangle and the pattern’s implied outcome.

The rising wedge (ascending) pattern, characterized by a decline in trading volume as the wedge advances, portends impending price declines or a breakout into a downtrend, making it a bearish pattern. Despite the wedge capturing the rising price action, the decreases in trading volume may indicate that sellers are strengthening their position in anticipation of a bearish breakout.

On the other hand, the falling wedge (descending) pattern has a positive slope that slopes downward and suggests that a rally is forming nearby, making it a bullish pattern. The intriguing thing is that a rising wedge can appear as a continuation pattern during a downtrend or as a reversal pattern during an uptrend.

Read more: Cup And Handle Pattern: How To Identify And Take Leverage Of It? 

How to identify rising wedge patterns on a crypto chart?

The rising wedge pattern is typically seen following lengthy trends, making it useful for trading cryptocurrencies. The wedge pattern, for instance, may show up as a sign of an impending trend reversal if a crypto trend has advanced too far too quickly.

Strong trends are the result of the imbalance created between buyer and seller. Buyers and sellers are conducting business at each price. When there are too many buyers and not enough sellers, the price must be quickly raised, which should encourage more sellers to enter the market.

The price will quickly adjust higher if the higher pricing does not convince more sellers to sell. This quick readjustment produces strong uptrends due to buyers’ fear of missing out (FOMO, or fear of missing out).

The price will start to correct once this strong trend has taken hold and the big crypto whales have lost interest in purchasing, luring in the FOMO buyers. Another correction follows each new high, attracting more buyers. The rising wedge pattern has now developed, and the market is ready for a significant correction.

Example of rising wedge patterns

The chart below shows a perfect rising wedge stock pattern. The dramatic drift marked some improvement in August 2023. However, the breakout of the rally at $1.0500 creates a solid rising wedge. Later, the coin crashed and hasn’t improved so far.

As mentioned earlier, the price rises when there are too many buyers and not enough sellers. It persuades more sellers to enter the crypto market. The price will quickly adjust higher if the higher pricing does not convince more sellers to sell. This quick adjustment later results in significant uptrends.

Signs confirming bearish rising wedge pattern

A valid rising expanding wedge pattern includes the following:

• Rough waves overlap one another.
• A trend line of resistance that slopes upward.
• Greater peaks and greater valleys.
• A trend line of support slopes upward.
• Extrapolating the convergent and intersecting resistance and support trend lines.

There is a good chance you are looking at an ascending wedge pattern if you notice a pattern containing all these components.

Conclusion

Even though it can be challenging to identify in real-time, the rising wedge pattern is a favorite among traders and technical analysts. The straightforward entry and exit indicators make the rising wedge ideal. These signals are helpful for long-term traders who wish to HODL positions. However, going with a single technical aspect might not be helpful for accurately identifying the movement of tokens.

Read more: Hammer Candlesticks: How to Use This Indicator To Increase Crypto Profit?