Sometimes a derived graphic configuration appears inside the Expanding Wedge pattern. It is usually located two levels above the entry point. However, much depends on the stop loss order. On the contrary, if the pair goes into consolidation, then the probability of loss-making trades increases. If the struggle between the lions ends quickly, then the coyote will soon be full. The main problem is connected with the strength of opponents. Simply put, if the quotes, after reaching 78.6% of the wave 4-5, returns to 61.8%, there is a signal for opening the short position. Aggressive trading is based on selling at the return to the previous price level. The critical value is 78.6%.Ĭonservative strategy involves entering a short position at the repeated support test at point 5. The pattern is a reversal pattern, but if the correction passes the level of 88.6%, then it should be considered a trend continuation pattern. Formation of the Expanding Wedge pattern is considered complete if after point 5 there is a rollback in the direction of 23.6%, 38.2%, etc. The depth of its location does not matter either. Ultimately, endurance is almost the most important quality that a trader must possess.Īs soon as the quotes of the analyzed pair update the low at point 3, point 5 appears. ![]() ![]() The struggle of the two lions reaches the boiling point, and the coyote continues to wait. As a result, we have an Expanding Wedge - a combination of two differently directed lines 1-3 and 2-4. ![]() The starting point is the correctional low (point 2 of 1-2-3 pattern). The quotes go into consolidation, and the trader redraws the points in the chart. Buyers launch the attack, they test the high at point 3, however, their hopes will not come true either. If it occurs in a bullish market, then the inability of the bears to reverse the trend through the breakout of point 2 is the first sign of the strength of their opponents. Identification of the model begins with the appearance in the chart of the 1-2-3 pattern. I have used the techniques for improving it and trading strategies from my personal practice. This graphical configuration was developed by Thomas Bulkowski and first mentioned in the book Encyclopedia of Chart Patterns. The Expanding Wedge pattern on the basis of the 1-2-3 pattern will tell you how to do this. What you need to do is take the side of the winner. The emergence of several consecutive highs and lows simultaneously indicates an increase in volatility and blood fight for the initiative. If both opponents are strong, then, as a rule, this is expressed in the rewriting of extremums by the chart. Combination of Expanding Wedge and other patternsĬoyote Tactics: the Expanding Wedge will show the way.Coyote Tactics: the Expanding Wedge will show the way.The article covers the following subjects: Stand on the sideline and wait until the battle of lions is over. In this scenario, the best thing a trader can do is apply the Coyote tactics. Large fishes fight for the initiative, banks and investment companies give different estimates of the current situation, and the plankton rushes from side to side. It's different when the market consolidates. The crowd is trying hard to jump into one of the cars of the train leaving in a certain direction, analysts write the same typical forecasts, and any proposal to cross the road is perceived by the majority as dissent. Note: Yes, we keep harping on about the context of the overall trend, i know.When a trend dominates the market, few doubt who controls the situation. However, had it occurred during an overall uptrend, it would serve as a continuation signal and we would expect price to continue upwards after testing the channels of the wedge. In the example below, if it were to occur in a downtrend, we would expect the price to break to the upside, retrest the trend line and continue upwards, giving us a strong reversal signal from bearish, to bullish. We can see below that the bears are in control of this market, with clear Lower Highs (LH) and Lower Low’s (LL) occuring and just like above, we have a steeply angled support and resistance lines and price again consolidating in a “wedge” like formation.Īn important thing to remember when looking to trade these patterns is that the wedge must have at least 3 or more touches to validate it. The opposite of the rising wedge is of course, a falling wedge and signals that a reversal or continuation is on the cards and should be traded in the context of the overall trend as we mentioned above.
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