An invented price line: a fall in which each new low gains less than the last while the highs keep dropping, and then a rise, outlined by two falling lines that converge, one under the lows and a steeper one across the highs.
An invented chart, drawn to show the shape of a falling wedge. Not market data.
Also searched asdescending wedge · falling wedge chart pattern · bullish wedge · wedge pattern
How to recognise a falling wedge
- Lower highs and lower lows.
- Both lines slope downward.
- The upper line is the steeper one, so the two converge.
- Each push to a new low adds less than the one before.
What it is taken to mean
It is read as a fall that is losing force. Textbooks class it as bullish. At the end of a fall it is called a reversal; as a downward drift within a rise it is called a continuation.
That is a reading, and no more. A pattern is a description of what a price did, not a forecast of what it will do. Textbooks file this one under “either way”, which is a habit of naming and not a rule the market keeps.
How it is conventionally measured
The textbook measure is the height of the wedge at its widest, taken up from the point where the upper line broke. It is a convention and not a prediction.
What traders check
- Whether both lines fall and converge, or are in fact parallel.
- How many times each line has been touched.
- Whether the price has closed above the upper line.
Where people go wrong
- Calling the bottom while the price is still inside the wedge. Until it breaks, it is a price that is falling.
- Confusing it with a descending triangle, whose lower line is flat.
- Treating the textbook measure as a target.
On a real chart
Textbook shapes are rare. A real chart is ambiguous: the peaks are uneven, the lines can be drawn two or three ways, and the same candles are a falling wedge to one reader and something else to another. Most shapes are also recognised only once they are finished, which is after the move they are said to announce has begun.
The picture on this page is invented. It was drawn by hand to show the shape as plainly as possible, with every awkward detail left out. It is not market data and it records nothing that happened.
Questions people ask
- Is a falling wedge bullish?
- It is classed as bullish, although the price inside it is falling, because each new low gains less than the last. The class describes the drawing.
- How is a falling wedge different from a bull flag?
- A flag is short, follows a sharp rise and has parallel lines. A falling wedge is usually longer and its lines converge.
- Does a falling wedge predict a rise?
- No. It describes what a price did while the shape formed. Published studies of chart patterns disagree about whether they tell anything about the next move, and the tidy examples in textbooks were chosen afterwards, when the outcome was known. It is one observation to weigh with others.
The words on this page
An explanation for study. It is not advice, a recommendation or a forecast, and a pattern described here says nothing certain about what a price will do next.