What is a rising wedge pattern in trading?

Learn to identify and trade a rising wedge pattern – a narrowing pattern that can signal weakening momentum or a bearish reversal when paired with other indicators.

What is a rising wedge pattern?

A rising wedge pattern is a bearish chart pattern that can signal a reversal or continuation, depending on the prevailing trend. It forms when an asset’s price moves between two upward-sloping, converging trend lines. As the highs and lows rise, the range narrows – suggesting fading bullish momentum.

In a bear market, it’s often seen as a reversal pattern, indicating that buying pressure is weakening. In a bull market, it can act as a bearish continuation pattern, suggesting a pause before the downtrend resumes.

A breakdown typically occurs when the price falls below the lower trendline, hinting at growing bearish sentiment. This move is often more reliable when confirmed by higher volume and other technical indicators.

Past performance is not a reliable indicator of future results.

Characteristics of a rising wedge

To identify a rising wedge pattern, look for specific characteristics within the price action and learn these key rules:

Upward-sloping trendlines – observe two distinct trendlines sloping upwards. The lower trendline, which is typically steeper than the upper, connects successive higher lows, acting as support, while the upper trendline connects higher highs, providing resistance. These lines converge, narrowing the trading range over time.
Contracting price range – notice how the distance between peaks and troughs gradually narrows. This diminishing price range may indicate weakening bullish momentum. However, this is not always conclusive and false signals can occur.
Volume contraction – pay attention to trading volume. As the wedge forms, volume should decrease, potentially reflecting reduced buying interest. Lower volume during this period can provide an additional confirmation signal, though in some cases, volume may remain steady or increase before a breakout.
Breakdown – a confirmed break below this support line is considered by some traders to mark pattern completion and may provide an entry or exit signal. This breakout might be accompanied by increased trading volume, which may add weight to the signal and suggest a potential bearish reversal.

Not all breakouts are confirmed by volume, and not every breakdown results in a sustained reversal. Always cross-reference the rising wedge pattern across multiple timeframes, and consider factors such as market context and volatility.

To explore more chart patterns and what they reveal about historical price action, read our guide to technical analysis.

Rising wedge pattern in an uptrend vs downtrend

There are some important distinctions between a rising wedge pattern in an uptrend and one in a downtrend. Spotting these differences can help confirm the pattern and anticipate potential market moves.

Here’s how rising wedges in each of these market conditions compare:

	Rising wedge (uptrend)	Rising wedge (downtrend)
Expected outcome	Bearish reversal	Bearish continuation
Sentiment	Initially bullish, then bearish	Temporary bullishness, then bearish continuation
Volume pattern	Decreasing during formation, increases at breakdown	Decreasing during formation, increases at breakdown

Rising wedge in an uptrend

When a rising wedge forms during an uptrend, it may signal a bearish reversal. Initially, traders might view the upward-sloping lines as bullish, indicating continued strength.

However, the narrowing of the wedge reveals underlying weakness – buyers are struggling to push prices higher. Typically, this may lead traders to anticipate a breakdown through the lower support line, especially when supported by increasing volume.

Rising wedge in a downtrend

Conversely, when the rising wedge occurs in a downtrend, traders may interpret it as a brief pause or consolidation phase, rather than a significant reversal. The break of the lower trendline, particularly accompanied by rising volume, can provide confirmation that the original bearish trend is resuming.

Like all technical indicators, rising wedge patterns don’t guarantee specific outcomes and may produce false signals. Combine with other indicators to inform your trading decisions alongside the rising wedge pattern.

How to trade the rising wedge pattern

1. Confirm the breakdown

Wait for the price to break decisively below the wedge’s lower trendline. A rising wedge is often accompanied by declining volume during its formation, suggesting waning bullish momentum. If a breakout is accompanied by increased volume, this can add confidence, but it is not always present. Without such confirmation, the breakdown may be less reliable, risking premature or false entries.

2. Entry points

Here are some common approaches to trade after breakout confirmation:

Immediate entry: enter a short position once the price closes decisively below the lower support trendline, rather than immediately on the break. Waiting for a candle close helps to confirm the breakout and reduce the risk of a false signal.
Retest entry: wait for the price to rise and retest the broken trendline from below. A retest may offer additional confirmation that former support could be acting as resistance, which might help to filter out some false breakouts.

3. Stop-loss placement

Position your stop‑loss* just above the last high within the pattern. This can limit risk if the pattern invalidates and prices unexpectedly reverse higher. Adjust the stop‑loss according to volatility to prevent premature trade exits, allowing the market adequate breathing room.

4. Determine your profit targets

Identify a clear profit target by measuring the wedge’s vertical height at its widest point and projecting this measurement downward from the breakout point. Alternatively, some traders use Fibonacci retracement levels as additional or supplemental targets.

5. Confirm the trade signal

Use technical indicators, such as the relative strength index (RSI) or moving average convergence divergence (MACD), for additional confirmation. Bearish divergences – when the indicator forms lower highs despite rising price highs – can strengthen the signal, though these indicators provide supporting evidence rather than certainty.

6. Risk management and position sizing

Always align your trade size with your individual risk tolerance and account size. Effective risk management aims to ensure that no single trade disproportionately impacts your capital. Trailing stop-losses* can help lock in gains as the price moves favourably.

*Stop-loss orders aren’t guaranteed. Guaranteed stop-losses (GSL) are available with some brokers – including ours – and incur fees if they are activated.

Past performance is not a reliable indicator of future results

Discover 12 chart patterns for traders

Rising wedge vs ascending triangle

If you haven’t already, learn how to distinguish between a rising wedge and an ascending triangle, as each pattern carries distinctly different market implications.

Rising wedge patterns feature two upward-sloping, converging trendlines. This shape signals diminishing momentum, typically forecasting a bearish reversal. Traders look for volume decreases within the wedge formation, followed by an increase upon breakout, confirming the bearish signal.

Conversely, ascending triangles have a flat, horizontal resistance level at the top with an ascending trendline forming higher lows. Unlike the rising wedge, an ascending triangle is generally viewed as a bullish continuation pattern, though breakdowns can occur. Traders anticipate a breakout above resistance, particularly when accompanied by rising volume.

For more on triangles and you can approach them, read our comprehensive trader’s guide to triangle patterns.

Real chart example of a rising wedge pattern

US 500 index – rising wedge during a downtrend

Context – after a broad market sell-off in June 2022, the US 500 entered a temporary rally in July.
Wedge formation – from 1 July to 16 August 2022, the index recorded a series of marginally higher highs and higher lows, with some signs of momentum loss.
Volume confirmation – trading volume generally declined throughout the formation, which is typical for such patterns, although there were some sessions with elevated volume.
Breakout – on 18 August 2022, the US 500 broke below the lower wedge boundary with an increase in volume. This was seen by some as a bearish continuation signal, with the index subsequently falling until September.

Trade US 500 index CFDs

Past performance is not a reliable indicator of future results.

FAQs

What is the rising wedge pattern?

The rising wedge is a chart pattern where price action moves between two upward-sloping, converging trendlines. It typically signals fading bullish momentum, as each rally becomes progressively weaker and the trading range tightens. While most often interpreted as a potential reversal pattern, it can also act as a continuation signal when it develops within a broader downtrend.

Is the rising wedge pattern bullish or bearish?

While the rising wedge has an ascending shape, it’s usually considered a bearish pattern. This is because the formation tends to develop as buying pressure diminishes, often ending in a downside breakout. However, if the pattern fails and price breaks to the upside instead, it can trigger a short-lived rally – though the classic interpretation remains bearish.

Can a rising wedge occur in an uptrend?

Yes, rising wedges are commonly found during uptrends. When they appear, traders view them as signals that the prevailing bullish trend is losing momentum, raising the likelihood of a bearish reversal. Rising wedges may also develop during downtrends, where they are often regarded as continuation patterns ahead of the prevailing trend’s resumption.

How do you trade a rising wedge?

The standard approach is to wait for a decisive break below the wedge’s lower support line, often accompanied by higher volume. Some traders enter short positions at this point, while others look for a brief retest of broken support for extra confirmation. Sound risk management is crucial – placing stop-loss orders just above the recent swing high can help limit losses if the pattern fails.

How reliable is the rising wedge pattern in volatile markets?

In highly volatile markets, the reliability of the rising wedge pattern tends to decrease. Sudden price swings can trigger premature breakouts or false signals. Combine chart patterns with supporting indicators – such as RSI or MACD – to improve accuracy. Past performance isn’t a reliable indicator of future results.