The falling wedge is similar to the rising wedge and is considered to be a bullish continuation chart pattern in a up trending market or a reversal pattern in down trending market. The trading pattern is formed by two trend lines that slope down.
In order to qualify as a falling wedge pattern, there must be at least two points of lower swing highs (resistance) and two points of lower swing lows (support). The pattern is confirmed on a sustained break of the falling wedge. Falling wedges are most reliable in strong up trends.
Forex Falling Wedge Pattern (USD/JPY 1 Hour Chart)
Falling Wedge Trading Ideas
In up trends
Conservative forex traders: wait for a sustained break of the falling wedge pattern to the upside (breaking resistance).
Aggressive forex traders: Same comments as trading rising wedges in down trends, my advice is to follow the conservative traders idea.
In “strong” down trends
My experience learnt me that trading falling wedges in downtrends often fail, thus resulting in bad trades. My advice is to ignore them and to wait for better trading opportunities.