Welcome to Lesson 7 of Forex Chart Formation Patterns. Today, you’ll learn how to identify and trade the falling wedge pattern, a key bullish formation in forex trading.

What Is the Falling Wedge Pattern?

The falling wedge pattern forms when price action shows lower lows and lower highs, with the resistance line steeper than the support line. This pattern signals a loss of momentum in the downward trend, suggesting an underlying bullish strength.

Pattern Variations

There are two types of this patterns to understand:

Bullish Reversal Pattern

• Appears after a significant downtrend.
• Price continues making lower lows, but with weakening momentum.
• A breakout above the resistance line confirms the reversal and shift to bullish sentiment.

Bullish Continuation Pattern

• Forms during an uptrend as a temporary retracement.
• Price action slows and narrows within the wedge.
• A breakout to the upside resumes the prevailing bullish trend.

Identifying the correct wedge type allows you to align with broader market direction and increase trade accuracy.