Effort up, result down Converging lines record a trend that gains less on every push
A wedge is two trend lines that slope in the same direction and converge. The convergence is a measurement: each push makes less progress than the last.
In a healthy uptrend, every leg up covers about as much ground as the previous one, and the pullbacks respect a parallel channel. In a rising wedge, the lows keep rising fast (buyers still chase every dip) but the highs rise slower and slower (each rally dies earlier). The trend is spending the same effort and getting a smaller result every time. Squeeze those two facts onto a chart and you get converging lines.
Both lines slope up and converge. Lows rise faster than highs. Momentum is dying into the highs, so the textbook resolution is a break down. Shows up at the end of rallies and as a weak upward correction inside downtrends.
Both lines slope down and converge. Highs fall faster than lows. Selling pressure is exhausting into the lows, so the textbook resolution is a break up. Shows up at the end of sell-offs and as a shallow dip inside uptrends.
How to draw both wedge types Anchor on wicks; two touches define each line, a third confirms it
Anchor each line on real wick extremes and the wedge should draw itself. If you are nudging anchors to make the lines converge, the pattern is not there. Skip it.
- Find the swings. Mark the swing highs and swing lows of the move you think is stalling. You need at least two of each to attempt a wedge.
- Anchor the first line on wicks. Connect the swing highs through their wick extremes, not the candle bodies. Wicks are where the auction actually traded.
- Anchor the second line the same way. Connect the swing lows. Do not tilt either line to force a shape.
- Count the touches. Two wick touches define each line; a third touch confirms it and strengthens the pattern. A line with one real touch and one forced one is not a line.
- Check the geometry. Same direction plus convergence equals a wedge. Parallel lines are a channel, a trend tool rather than an exhaustion pattern. Diverging lines are a megaphone. Each gets a different trade plan.
The momentum signal inside the wedge Shrinking bodies, growing overlap, wicks doing the touching
Momentum loss shows directly in the candles: bodies shrink and neighbors overlap more as price grinds toward the apex. No oscillator required.
Early in the pattern the pushes are honest: full bodies, small overlap, each candle covering new ground. Late in the pattern the bodies compress, every candle trades mostly inside the previous one, and the lines get touched by wicks instead of bodies. That is the auction failing to find acceptance at new prices. The break that follows this compression tends to expand hard, because every position built inside the chop has to reposition at once.
Where the stops sit and why they get swept Price runs the cluster on the obvious side before it breaks the other way
A wedge usually breaks against its slope, and the break is usually preceded by a detour: a sweep of the stops on the sloped side. A rising wedge tends to poke above its highs before it breaks down.
A clean rising wedge parks orders at obvious prices. Longs have stops just below the lower line. Breakout traders have buy stops just above the recent highs. Shorts who faded the highs have covering stops there too. That shelf above a rising wedge is a stop cluster: a dense pocket of guaranteed orders. Institutions that want to sell size need exactly that kind of buying to fill against, so price gets pushed into the cluster first. The wick spikes above the highs, the buy stops and breakout orders get consumed, and the breakdown follows. The sweep supplies the buying that large sellers fill against.
Trading the break Let it sweep, let it break, enter on the retest
Enter after the pattern has proven itself: sweep done, break closed, and price rejecting the retest. Catching the exact top is not part of the plan.
- Wait for the sweep. On a rising wedge, let price poke above the highs and fail. If the sweep has not happened, the fuel above is likely unspent, and early shorts feed it.
- Demand a real break. An expansion candle that closes through the lower line, not a wick poking it. Body close beyond the line or it did not happen.
- Do not chase the break candle. It is usually stretched, and your stop distance is at its worst there.
- Enter on the retest. Price pulls back into the broken level, stalls, and rejects. That rejection is your entry trigger. If it never retests, skip the trade.
- Stop above the sweep high. That extreme is the level the market already used to refuel. If price accepts back above it, your idea is simply wrong.
- Target the wedge origin. The move tends to travel back to where the pattern began. Take partials there and reassess.
Invalidation: know when the wedge is dead
- Acceptance beyond the sweep: one wick above the highs is a sweep; candles opening and closing above them is a breakout. Direction changed, get out.
- The retest keeps going: if the pullback closes back inside the wedge and holds there, the break failed. Failed wedge breaks often run hard the other way, so exit fast.
- The pattern grinds past the apex: a real wedge resolves before the lines meet, roughly in the final third. Price still chopping at the apex means the energy already leaked out. Stand down.
- A wedge is effort up, result down: converging lines measure a dying trend.
- Anchor both lines on wicks: two touches define each line, a third confirms it.
- Momentum tell: shrinking bodies and growing overlap into the apex.
- Textbook: wedges break against the slope. Rising breaks down, falling breaks up.
- Liquidity read: the obvious side gets swept first, stops above a rising wedge high are the fuel.
- Trade the break-retest, stop beyond the sweep, target the wedge origin.