![]() ![]() Then, superimpose that same distance ahead of the current price but only once there has been a breakout. Traders can look to the starting point of the descending wedge pattern and measure the vertical distance between support and resistance. Setting the stop loss a sufficient distance away allowed the market to eventually break through resistance (legitimately) and resume the long-term uptrend. Traders can place a stop below the lowest traded price in the wedge or even below the wedge itself. The fakeout scenario underscores the importance of placing stops in the right place – allowing some breathing room before the trade is potentially closed out. This is a fake breakout or “fakeout” and is a reality in the financial markets. In the Gold chart below, it is clear to see that price breaks out of the descending wedge to the upside only to return back down. Connecting the lower highs and lower lows will reveal the slight downward slant to the wedge pattern before price eventually rises, resulting in a falling wedge breakout to resume the larger uptrend. The descending wedge pattern appears within an uptrend when price tends to consolidate, or trade in a more sideways fashion. Get My Guide How to Trade the Falling Wedge Patternīelow are various ways to trade the falling wedge using technical analysis:
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