In the financial markets, there are a lot of candlestick patterns that can be used for conducting price action analysis. Some frequently appear, others not so often. Two patterns that don’t appear commonly are ascending triangle and the rising wedge. The two patterns may look similar, but they have different trading strategies. So, let’s see the differences between the two and how to trade them.
What is the Ascending Triangle?
The ascending triangle is a trend continuation pattern that occurs in an uptrend. The price rises significantly before dropping and then consolidating in a tight range. Once the price breaks through the range, it forms a triangle, confirming the emergence of the ascending triangle.
When the price makes several tops, it acts like a resistance level in the ascending triangle. It means the price could be about to reverse from these levels.
What is the Rising Wedge?
The rising wedge is a reversal pattern that appears in an uptrend. The formation of the pattern is similar to that of ascending triangle.
Here, the price makes a downtrend, consolidates in a tight range, and then breaks the support level to signal a trend reversal.
So, you can tell ascending triangle is a continuation pattern, while the rising wedge is a reversal pattern.
Ascending Triangle & Rising Wedge Strategy
As mentioned above, ascending triangle and rising wedge have a similar structure, but ascending triangle is a continuation pattern while the rising wedge is a reversal pattern.
It’s important to remember that ascending triangles and rising wedges don’t appear frequently on the charts. If they do, they mostly appear on longer timeframes which I find can give more reliable trade setups as they contain more price data.
To trade with the ascending triangle, you must wait for the price to break above the resistance level. This indicates a strong upward momentum, and we can take long positions comfortably.
Buy Signal
- Locate the pattern in an uptrend.
- Draw two trendlines, one from the bottom and one from the top.
- You could enter the trade when the price breaks above the upper trendline.
- You could set take-profit at the previous high.
- You could place a stop-loss at the lower trendline.
In the rising wedge pattern, you must look for a break below the support level. Once the level is broken, you can take short positions. Also, the price suddenly drops before creating the rising wedge pattern.
Sell Signal
- Locate the pattern in an uptrend.
- Draw two trendlines, one from the bottom and one from the top.
- You could enter the trade when the price breaks below the lower trendline.
- You could set take-profit at the previous low.
- You could place a stop-loss at the upper trendline.
Conclusion
The ascending triangle and the rising wedge patterns are key chart patterns, and if you can identify them properly, they present good short and long-trading opportunities. Although the patterns aren’t common, you can find them on longer timeframes after the price is making a strong momentum. Remember that ascending triangle is a continuation while the rising wedge is a reversal pattern.
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