Trading with the ascending wedge: my personal perspective

The ascending wedge is one of those patterns that has really fascinated me throughout my trading career. This pattern, which forms when the price advances with converging lines, usually indicates that the bullish momentum is weakening. I have used it countless times to detect possible reversals or confirm existing bearish trends.

The essence of the ascending wedge

In my experience, when I see that the highs and lows are getting higher but the lines connecting them are converging, something is about to happen. The price is rising, yes, but with increasingly weaker momentum that usually ends in a bearish breakout.

What catches my attention the most is:

• The upper and lower trend lines have an upward slope but are getting closer together.
• The volume decreases during the formation, a clear sign of lower participation
• The bearish breakout confirms the entire pattern when the price breaks the lower support.

Variants that I have identified

In my trades, I have found two main types:

1. Reversal Wedges: They appear after strong bullish trends. I have seen how many traders fall into the trap of thinking that the bullish movement will continue.

2. Continuation wedges: I have seen them form during bearish trends as brief pauses. They are excellent opportunities to enter short if you know how to identify them.

My personal method for trading this pattern

After many mistakes, I have developed my own system:

First, I identify two converging lines with an upward slope, connecting at least two points each.

Second, I check the volume. If it decreases while the pattern is forming, it's a good sign. An increase during the breakout gives me more confidence.

Third, I patiently await the breakout. I have lost money by getting ahead of myself, so now I wait for clear confirmation.

Fourth, I calculate my target by projecting the initial height of the wedge from the breakout point.

Fifth, I always place a stop-loss above the last high or above the upper line.

Strategies that have worked for me

The new test strategy (retest) is my favorite. After a breakout, the price often returns to test the lower line. That moment is pure gold for entering short with reduced risk.

I also combine this pattern with the RSI looking for bearish divergences. When the price makes higher highs but the RSI does not confirm them, the probability of success increases significantly.

Mistakes I have made

My worst mistake was entering too early, before the confirmation. I also ignored the volume and it cost me dearly. And of course, trading without a stop-loss… a madness I won't repeat.

The ascending wedge can be extremely profitable if traded with discipline. The key is patience and always waiting for confirmation before executing the trade.