M4 · Part 2 — Tops & Bottoms (reversals) · Lesson 44/144
7 min 50 XP
A wedge looks like a trend, but its two lines slope the same direction and converge. A rising wedge has both lines rising, with the lower line steeper (the lows catch up to the highs). A falling wedge has both lines falling, with the upper line steeper. The converging lines mean momentum is fading even as price keeps trending.
The trap: they break the opposite way
This is what catches everyone. A RISING wedge — full of higher highs — is bearish and breaks DOWN. A FALLING wedge — full of lower lows — is bullish and breaks UP. They resolve against the direction they point. If you trade the obvious trend, the wedge traps you.
Wait for the break of the wedge (a close beyond the line it converges toward), ideally with a retest. Stop just back inside the wedge. The target is generous: price usually retraces the entire wedge, back to the base where it began. Wedges can also appear mid-trend as continuation, but the rule is the same — trade the break, not the lean.