What is a wedge pattern in trading?
In one line: A wedge is a chart shape where price moves between two lines that slope in the same direction and get closer together, showing a move slowly losing strength.
What it looks like
Draw a Trendline across the highs and another across the lows. In a wedge, both lines slope the same way, up or down. But they aren't parallel. They come together.
- Rising wedge: both lines point up, and the lower line rises faster than the upper one.
- Falling wedge: both lines point down, and the upper line falls faster than the lower one.
A simple example
A stock climbs inside a rising wedge.
| Swing | High | Low |
|---|---|---|
| 1 | $40.00 | $36.00 |
| 2 | $41.50 | $38.50 |
| 3 | $42.30 | $40.40 |
Each high is higher, so the climb continues. But look at the gains. Highs rose $1.50, then only $0.80. Lows rose $2.50, then $1.90. The room between them shrinks from $4.00 to $1.90. Each push up is getting shorter.
Then a daily candle body closes at $39.90, below the lower line. The wedge has broken down.
Why it matters
A wedge shows a trend running out of push while still moving the same way. Price keeps making new highs, but each one comes with less effort.
That's why a rising wedge often turns into a fall, and a falling wedge into a rise. Often, not always. Some break the "wrong" way. Our wedge patterns guide shows both kinds step by step.
Many traders pair it with Divergence on an indicator like RSI, which can show the same tiring push in a second way.
Wedge vs triangle
A Triangle pattern also squeezes, but its lines point in different directions, or one is flat. A wedge's lines point the same way. That one difference changes what the shape is saying.
Where a stop would go
For a short after a rising wedge breaks, a stop above the last high in the wedge ($42.30 here) marks where the idea is wrong. Size it from that distance with the position size calculator.
A common mistake
Shorting a rising wedge before it breaks. While price is still inside the lines, the trend is still up. Trading the guess is trading against the trend. Wait for a body close outside the wedge.
Questions
Is a rising wedge bullish or bearish?
It's usually read as bearish, because the climb is losing strength. A falling wedge is usually read as bullish. Both can fail.
How many touches does a wedge need?
Many traders want at least two touches on each line, so the lines are drawn from real turning points rather than guessed.
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