The triangle-like model used in technical analysis that goes up or down to signal a pause in the current price trend is called “wedge” or “wedge”.
Observing the wedge (or wedge) pattern often implies that investors are undecided about the direction of the pair.
When this pattern, which is thought to be in which the superior side in the struggle between bears and bulls starts to lose power and the weak one catches the balance, signals that the trend will continue or move in the opposite direction depending on the situation.
Ek okuma: What orders are used in crypto money exchanges?
Wedge or wedge models are divided into two basic groups according to upward or downward direction:
Rising wedge (wedge) formation
If the rise in bottom prices is faster than the rising peaks, a rising wedge formation occurs. This pattern appears when the pair begins to squeeze between the support trend line observed in rising lows and the resistance trend line formed at rising high prices.
The angle of the support line is greater than the resistance line. Thus, a rising wedge is formed between the rising support and the resistance line. When this type of formation is observed, an expectation of upward or downward movement is made after consolidation.
“If the rising wedge occurs during the bull market, it usually results in a decline. The rising wedge observed during the bear market signals that the downward movement will continue.”
The rising wedges observed in the bear market indicate that the price will increase with reaction purchases for a certain period of time, and the downtrend will continue after the downward break of the support line.
You may be interested in: What is the dollar average cost (DCA)?
Regardless of whether it is in a downward or upward trend, when the rising wedge or wedge pattern is observed, traders usually take positions by calculating that there will be a decrease.
Descending wedge (wedge) formation
Similar to the rising wedge model, the descending wedge formation can also be interpreted as a reversal or continuation of the general process.
If the rate of decrease in the bottom prices is slower than the decreasing peak prices, a descending wedge formation occurs. The pair is squeezed between the support trend line observed in falling bottom prices and the resistance trend line formed at the peak prices in the downward period.
Ek okuma: What are short and long positions?
The angle of the support line is less than the resistance line. Thus, a descending wedge occurs between the regressing support and the resistance line.
“If the descending wedge occurs during the bull market, the uptrend generally continues. The descending wedge observed during the bear market signals that the downward movement will reverse and the uptrend will begin.”
If the descending wedge is observed in the process of the upward price trend, it can be interpreted that there will be reaction sales for a certain period of time and then an increase will be observed.
With the break of the model’s resistance line, the bull market is expected to continue. In other words, it is understood that the trend will continue.
When descending wedges are seen in a downward trend, it is signaled that a sharp turn may be experienced. Subsequently, an increase is expected.
You may be interested in: What is the price index? Why are the prices on the stock exchanges different?
Reminding: No technical indicator alone is sufficient to predict prices. As with almost every indicator data, the wedge (wedge) model makes sense when used with other market data.
DISCLAIMER: The statements contained here are not investment advice. Never trade without researching the markets thoroughly and without comments from different circles. Read the comments of the investors you trust and consult their opinions. Remember that every trading transaction involves risk. Make your own decision when taking any action. Cointelegraph cannot be considered directly or indirectly responsible for any damages or losses arising or allegedly arising from investment products or services.