What is a Rising Wedge Formation?

The rising wedge formation is an important formation type that every investor should know, as it is focused on a downward trend. It is a formation type that must be learned in order to determine price movements and/or predict the actions investors will take in the history of capital markets up to the present day.

Rising wedge formation indicates a downward trend in price, while a falling wedge formation indicates an upcoming upward trend in price.

To detect a rising wedge formation, two boundary lines are drawn between which the price of Bitcoin moves closer and closer together, causing a squeeze in the price. The formation is completed when the price breaks through the boundary lines, resulting in a drop in price.

One of the distinguishing features of a rising wedge formation is that it occurs after a downward trend. In addition, at the beginning of the formation, the volume is high, but as the price movement becomes closer, the volume decreases. Ultimately, the price and decreasing volume that become increasingly squeezed towards the top of the wedge end the formation and result in a drop in price.

If you own the asset during the formation of a rising wedge, it is recommended that you draw the formation and wait for the peak point before the two boundary lines reach each other to sell. The point where the peak points of the price graph are closest to each other and the volume is lowest is where a sell order can be placed. The fact that the price is approaching the boundary lines indicates that the time for selling is running out and the risk is increasing.

Finally, as mentioned in the previous paragraph, investors who own the asset can also open a short position near the end of the formation, where the asset can be sold. However, every investor must weigh the risk and make their own decision when making these moves.

This article was first published on CoinOtag.