A rising wedge pattern is a bearish chart pattern formed by two upward-sloping trend lines that converge, with the support line rising at a steeper angle than the resistance line. The rising wedge shows that buying momentum is fading while price still makes higher highs and higher lows, and it usually ends with a downside breakout below the support line.
Traders use two main entry strategies to trade a rising wedge: 1) a short position on a candle close below the support line, 2) a short position on a retest of the broken support line, with a price target set by projecting the maximum pattern height down from the breakout. The rising wedge is one of the core chart patterns in technical analysis.
What Is a Rising Wedge Pattern?
A rising wedge is a bearish chart pattern in which price moves higher between two trend lines that both slope upward and draw closer together. The rising wedge starts wide at its first swing high and swing low, then narrows as price climbs toward the point where the two trend lines meet, called the apex. This signals a bullish trend currently losing momentum and traders watch rising wedges to plan entry for a short position (selling by borrowing stocks).
The lower support line connects the rising swing lows, and the upper resistance line connects the rising swing highs. In a rising wedge, the support line is steeper than the resistance line, so the swing lows rise faster than the swing highs.
Traders also call the rising wedge an ascending wedge. The rising wedge chart pattern has a bearish bias whether it forms in an uptrend or a downtrend, and traders watch for it on stock, forex, commodity and futures charts on any timeframe from intraday to weekly.
How Do You Identify a Rising Wedge Pattern?
To identify a rising wedge pattern, traders check four features: 1) a current bullish trend (prior trend), 2) two converging upward-sloping trend lines, 3) enough touches on each trend line, and 4) volume that declines as the rising wedge develops. A chart shape that is missing one of these features is more likely to produce a false signal.
Current Bullish Trend / Prior Trend
A rising wedge that acts as a reversal needs an existing uptrend to reverse. The rising wedge either forms at the end of a strong uptrend or contains the whole uptrend inside its two trend lines.
Upper Resistance Line and Lower Support Line
Both trend lines in a rising wedge slope upward, and each swing high and each swing low is higher than the one before. The support line rises at a steeper angle than the resistance line, which squeezes the price range as the rising wedge matures.
When the two trend lines run parallel, the chart is called a rising channel instead of a rising wedge. A rising wedge needs the gap between the support line and the resistance line to shrink with each swing.
Minimum Number of Touches
Each trend line in a rising wedge needs at least two touches, and a better rising wedge has three touches on one trend line and two on the other, for five touches in total. More touches show that traders are reacting to both trend lines, which makes the rising wedge more reliable.
Declining Volume
Volume usually declines as price rises inside a rising wedge. Falling volume on each new swing high confirms the weakening momentum that is expected with rising wedge.
Why Does a Rising Wedge Pattern Form?
A rising wedge forms when buying momentum fades even though price keeps making higher highs. Each move up from the support line is a smaller percentage gain than the last move, so the resistance line rises at a flatter angle than the support line.
The flatter resistance line shows that buying pressure or momentum is exhausting. Buyers still step in at each swing lows to reverse the move, but each push higher exhaust faster.
A downside breakout below the support line shows that sellers have taken control from buyers. Traders who bought inside the rising wedge get their stop losses triggered as the support line fails, and new short sellers add to the selling, which speeds up the fall.
How Do You Trade a Rising Wedge Pattern?
Rising wedge trading follows five steps: 1) wait for confirmation, 2) choose an entry, 3) place the stop loss, 4) set the price target, and 5) check the risk-reward ratio before opening a short position. The converging trend lines keep the stop loss close to the entry, which is the main practical advantage of trading a rising wedge.
Step 1: Wait for Confirmation Below the Support Line
A rising wedge is confirmed when a candle closes below the support line. Price often dips below the support line during a session and then closes back inside the rising wedge, and a trader who sells on that intrabar move is caught in a false breakout.
Some traders prefer to wait for the breakout candle to break and close below the most recent swing low inside the rising wedge. An increase in volume on the breakout candle adds weight to the confirmation.
Important: A short position opened before a candle closes below the support line has a much higher chance of being stopped out by a false breakout, so wait for the breakout candle to close on the timeframe you are trading.
Step 2: Choose Your Entry at the Breakout or the Retest
Traders enter a rising wedge trade in one of two ways. The breakout entry opens a short position at the close of the confirmation candle or at the open of the next candle.
The retest entry waits for price to rise back to the broken support line from below and opens a short position when price turns lower from the support line. The broken support line acts as new resistance during a retest.
The retest entry gives a tighter stop loss and a better risk-reward ratio, because the stop loss can sit just above the retest high. However, many rising wedges never retest the support line, so a trader who only uses the retest entry misses those trades, and some traders split the position between the breakout entry and the retest entry for that reason.
Step 3: Place the Stop Loss Above the Last Swing High
The stop loss for a rising wedge short position goes just above the last swing high inside the rising wedge. If price climbs back above that swing high, the bearish reading of the rising wedge is no longer valid and the trade should close.
Leave a small buffer above the swing high to cover the spread and normal price noise. A stop loss placed exactly on the swing high is often triggered by a brief spike before price falls.
Step 4: Set the Price Target Using the Pattern Height
The standard price target for a rising wedge uses the maximum vertical pattern height, which is the distance between the resistance line and the support line at the widest part of the rising wedge, near its start. Traders use the maximum pattern height from the breakout price to get the price target.
For example, if a rising wedge is 0.0200 tall at its widest part and the breakout happens at 1.1500, the price target is 1.1300.
The maximum pattern height only gives an estimate, so traders also check the price target against the nearest previous support level. When a previous support level sits above the projected price target, many traders take profit at that previous support level first, because support levels are where prices bounce back.
Step 5: Check the Risk-Reward Ratio and Position Size
Before opening a short position on a rising wedge, compare the distance to the price target with the distance to the stop loss. A common rule is to take the trade only when the potential reward is at least twice the risk, a risk-reward ratio of 1:2.
Set the position size so that a stop loss hit costs only a fixed share of the account, such as 1%. Divide the amount at risk by the stop loss distance in pips multiplied by the pip value per lot to get the position size in lots.
Rising Wedge Pattern Example on EUR/USD
The EUR/USD daily chart from September 2020 to February 2021 shows a rising wedge that formed at the end of an uptrend and reached its price target. EUR/USD had risen from about 1.1200 in June 2020 to around 1.2000 by September 2020 before the rising wedge began.
The resistance line connected swing highs in October and December 2020 and the swing high near 1.2349 on 6 January 2021. The support line started at the swing low near 1.1603 in early November 2020 and connected the higher swing lows through December, rising at a steeper angle than the resistance line.
The pattern height, measured at the widest part of the rising wedge from the October swing high near 1.1880 down to the November swing low near 1.1603, was about 0.0279, or 279 pips. The downside breakout came in the second week of January 2021, when EUR/USD closed below the support line near 1.2290.
| Trade element | Level | How it was set |
|---|---|---|
| Breakout entry | About 1.2290 | Daily close below the support line |
| Stop loss | About 1.2370 | Above the 1.2349 swing high, with a buffer for the spread |
| Pattern height | 0.0279 (279 pips) | Widest part of the rising wedge, October high to November low |
| Price target | About 1.2011 | 1.2290 minus 0.0279 |
| Previous swing high | About 1.2010 | September 2020 high, close to the price target |
| Risk-reward ratio | About 1:3.5 | 80 pips of risk against 279 pips of potential reward |
| Outcome | Price target reached | EUR/USD traded below 1.2011 in early February 2021 |
The price target near 1.2011 lined up with the September 2020 swing high near 1.2010, which gave the price target extra weight. EUR/USD traded below 1.2011 in early February 2021, about four weeks after the breakout.
The EUR/USD rising wedge also shows why the retest entry does not always trigger. After the breakout, EUR/USD rose back to around 1.2190 in mid-January 2021, but the support line had climbed above 1.2300 by then, so price never returned to the broken support line.
The 14-period RSI showed bearish divergence on the EUR/USD rising wedge: the RSI rose above 75 in December 2020 and made a lower peak when EUR/USD made its higher high on 6 January 2021. The daily chart feed carried no exchange volume for EUR/USD, which is normal for spot forex, so a trader checking volume on this rising wedge would use tick volume in MT4 or MT5.
Which Indicators Confirm a Rising Wedge Pattern?
Traders confirm a rising wedge pattern with volume and a momentum indicator such as the RSI or the MACD. The close below the support line is the trading signal, and indicators gives more confidence in that signal.
Volume on the Breakout
Volume should decline while the rising wedge forms and then expand on the breakout candle. A breakout below the support line on rising volume shows that sellers are committing, while a breakout on light volume has a higher chance of reversing back into the rising wedge.
RSI and MACD Divergence
Bearish divergence happens when price makes a higher high inside the rising wedge while the RSI or the MACD makes a lower high. Bearish divergence confirms that buying momentum is fading, which matches what the converging trend lines show on the price chart.
An RSI reading above 70 at the later touches of the resistance line adds an overbought signal. Overbought readings can last through a strong uptrend, so treat an RSI above 70 as supporting evidence and wait for the close below the support line before opening a short position.
What Are the Two Types of Rising Wedge Patterns?
The two types of rising wedge patterns are the bearish reversal and the bearish continuation. The trend before the rising wedge decides the type: a rising wedge that slopes in the same direction as the trend is a reversal, and a rising wedge that slopes against the trend is a continuation.
Rising Wedge Pattern in an Uptrend: Bearish Reversal
A rising wedge pattern in an uptrend forms near the end of a sustained advance and warns that the uptrend may reverse into a downtrend. Price keeps making higher highs and higher lows inside the rising wedge, but each new high comes with weaker buying momentum.
A reversal rising wedge on a daily chart can mark the end of an intermediate or long-term uptrend. A daily close below the support line confirms the bearish reversal.
Rising Wedge Pattern in a Downtrend: Bearish Continuation
A rising wedge pattern in a downtrend forms during a pullback, a short-lived move up against the main downtrend. The upward slope of the rising wedge runs against the downtrend, and a close below the support line signals that the downtrend is resuming.
In both types, a bearish rising wedge resolves with a downside breakout below the support line. Traders handle the entry, stop loss and price target the same way for a reversal and for a continuation.
How Do You Trade a Rising Wedge in Forex and Gold CFDs?
Trading a rising wedge on forex pairs and gold (XAU/USD) through CFDs follows the same five steps as trading a rising wedge on stocks. The differences are in how volume is measured and in the costs and risks of holding a short CFD position.
CFDs let traders open a short position directly, without borrowing the underlying asset first. Short selling a rising wedge on EUR/USD or XAU/USD therefore works the same way as buying, with the order placed as a sell.
Using Tick Volume in MT4 and MT5
Spot forex has no central exchange, so there is no single volume figure for EUR/USD or XAU/USD. MT4 and MT5 show tick volume instead, which counts the number of price changes in each candle and tends to rise and fall with real volume.
Tick volume comes from each broker's own price feed, so compare tick volume readings within one chart and avoid comparing tick volume across brokers. On a rising wedge, look for tick volume falling across the swing highs and rising on the breakout candle.
Pro Tip: Add the Volumes indicator in MT4 or MT5 to read tick volume on a rising wedge, and compare the breakout candle with the candles that formed the last two swing highs.
Spreads, Slippage and Swap Costs on Short Positions
Spreads on forex pairs and gold widen around major news releases and at the daily rollover, and a stop loss placed tight above the last swing high can be hit by spread widening alone. Fast breakouts during news can also cause slippage, where the order fills at a worse price than requested.
Weekend gaps add a further risk, because price can open beyond the stop loss on Monday and the stop loss then fills at the first available price. A short CFD position held overnight also pays or earns a swap based on the interest rate difference between the two currencies, and on most forex pairs the swap is charged three times on Wednesday to cover the weekend.
TMGM clients can check the spread, swap rates and trading hours for each instrument in the MT4 and MT5 symbol specification before opening a short position on a rising wedge. CFD trading involves significant risk and is not suitable for all investors. You could lose more than your initial deposit.
Rising Wedge vs Ascending Triangle vs Falling Wedge: What Is the Difference?
A rising wedge has two upward-sloping trend lines and a bearish bias, while an ascending triangle has a flat resistance line, a rising support line and a bullish bias. The falling wedge is the mirror image of the rising wedge, with two downward-sloping trend lines, a steeper resistance line and a usual breakout to the upside.
| Chart pattern | Trend lines | Bias | Usual breakout |
|---|---|---|---|
| Rising wedge | Both slope up; support line steeper | Bearish | Below the support line |
| Ascending triangle | Flat resistance line; rising support line | Bullish | Above the resistance line |
| Falling wedge | Both slope down; resistance line steeper | Bullish | Above the resistance line |
| Symmetrical triangle | Falling resistance line; rising support line | Neutral | Either side, often with the existing trend |
The ascending triangle and the falling wedge each have their own entry rules, covered in our guides to the ascending triangle pattern and the falling wedge pattern.
What Are the Limitations of the Rising Wedge Pattern?
The rising wedge is one of the harder chart patterns to recognise and trade, and no rising wedge guarantees a downside breakout. Some rising wedges end with an upside breakout above the resistance line, which can start a fast rise as short sellers buy back their positions.
Drawing the trend lines is partly subjective, since one trader may connect candle wicks and another may connect candle bodies, which changes where the breakout happens. Narrow rising wedges tend to be less reliable than wide rising wedges.
Most valid breakouts happen in the second half of the rising wedge, before price reaches the apex. A rising wedge that drifts all the way to the apex without a breakout loses much of its reliability.
Rising wedges on daily and weekly charts are generally more reliable than rising wedges on 5-minute or hourly charts, because short timeframes carry more price noise. A stop loss above the last swing high limits the loss when a rising wedge fails, which is why every rising wedge trade needs one.
Frequently Asked Questions
Is a Rising Wedge Bullish or Bearish?
A rising wedge is bearish. The rising wedge signals that buying momentum is fading and usually ends with a downside breakout below the support line, whether the rising wedge forms in an uptrend as a reversal or in a downtrend as a continuation.
What Is the Best Timeframe for Trading a Rising Wedge?
Daily and weekly charts generally give the most reliable rising wedge signals, because rising wedges on those timeframes reflect larger shifts in supply and demand and produce fewer false breakouts. Day traders also trade the rising wedge on intraday charts, where rising wedges fail more often and need tighter risk control.
Is a Rising Wedge the Same as an Ascending Wedge?
An ascending wedge is another name for a rising wedge, and both terms describe the same chart pattern. An ascending wedge is bearish for the same reason as a rising wedge: the support line rises faster than the resistance line, and the ascending wedge usually ends with a downside breakout.
