Learning stock chart patterns leads to increased profits. Investors and stock traders who expand their knowledge will continue to expand their bank accounts. In today’s investor education piece, we will go over a stock chart wedge pattern (triangle pattern). The wedge pattern alerts investors to consolidation in price. In other words, price action is being digested before the next big move. Will the major move big up or down? That is determined by whether price breaks up or down out of the wedge pattern.
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Wedge patterns only form when you can clearly connect all the recent major highs and all the recent major lows. It creates a wedge or triangle pattern. This means price has to be making lower highs and higher lows. This is important because an investor must draw straight lines creating the wedge. The reason for the straight lines is to give a basis to the investor or stock trader of a definite breakout/breakdown point. Note the diagram below.
Stock market traders and investors need to understand how to trade a wedge chart pattern. The key is to be patient and watch it unfold. No investor or stock trader can tell you which direction it will break with 100% accuracy. The smart trade is to wait for it to break to to the upside or downside out of the chart pattern wedge. Once that happens, jump on board. Chart pattern wedges do one thing consistently. When they breakout or breakdown, the move is major. This means, by jumping on board when it breaks in one direction, the investor can maximize profit safely.
Patience is one of the biggest things any investor and stock trader must have. For wedge stock chart patterns this is absolutely true. In the above chart, investors can see the long period of chop as lower highs and higher lows were put in. Note how once the breakout took place, the stock surge in a major way. Use this technique to profit for centuries to come.