Like the rising wedge, the falling wedge can also send a reversal signal or a continuous signal.
When it appears as a reversal signal, it appears at the bottom of the downtrend, suggesting that a new round of rising market is about to start.
When it appears as a continuous signal, it is formed during the upward trend, which means that the price will restart the upward trend. Unlike the rising wedge, the falling wedge is a bullish pattern.
In this example, the descending wedge plays the role of reversing the signal. After experiencing a round of declines, prices have continued to go down in highs and lows.
Note that the slope of the downward trend line connecting the high points is steeper than the slope of the trend line connecting the low points.
After breaking through the resistance at the top of the wedge, the exchange rate moves up perfectly, and the increase is approximately equal to the height of the wedge shape. In this example, the exchange rate further increased after reaching the upward target.
Let us look again at the example where the descending wedge acts as a continuous signal. As we mentioned before, when a downward wedge shape is formed during the exchange rate rise, it usually implies that the upward trend will reopen in the near future.
In this case, the price fell into a consolidation pattern after a strong upswing. This may mean that the buyer just takes a breather and may gather more people to invest in the long team.
If we set our own stop entry order above the downtrend line of the descending wedge connecting the highs, we may have captured this round of ups and downs. The perfect upward target will be equal to the height of the wedge.
If you plan to pursue more profits, you can choose to lock in some profits after the price reaches the target and continue to hold the remaining positions.