The Falling Wedge chart pattern is a dual model that in some situations can indicate a continuation of a bearish trend, and in others, a bullish reversal. However, it is worth noting that such reversals are often short-term.
Externally, the Falling Wedge model is a kind of downward price spiral. This downward, wave-like price movement is limited by two trend lines that intersect at the bottom. The upper line (with a steeper downward slope) is the resistance level, and the lower one is the support level.
The Falling Wedge pattern is easy to construct. Draw one line through the most important peaks and another along the major troughs. They should intersect and slope downwards. The number of support points (peaks and troughs) is important – if there are less than five, the pattern is unreliable.
When to enter a trade? It's simple.
The signal is a breakout of one of the figure lines.
▪️Long, if the price has crossed the upper line (resistance level) - this indicates that the market will move upward in the near future (reversal signals for this model are more reliable than continuation signals).
▪️Short. Conversely, when the price crosses the lower border of the figure (support level), it signals the continuation of the downward trend. It is worth noting that signals received from wide models are more reliable than from narrow ones.
Most often, the price breaks through the boundaries of the "Falling Wedge" in the region of 67-100% of its length. That is, closer to the tip of the figure (the intersection point of the trend lines).
