Trends/Reversal patterns

Falling wedge

Both boundary lines slope down, but the upper one falls faster, so the lines close in and price is squeezed.

Reversal patternsBest on 6M, 1Y, 3YAlso called descending wedge

Illustration of the falling wedge shape. It is a sketch, not real price data.

What it shows

A falling wedge has an upper line and a lower line that both slope down and move toward each other. Price makes lower highs and lower lows, but the lows fall more slowly than the highs.

It is often found near the end of a fall and is usually described as a reversal pattern. It can also appear as a pause inside a rise. It is complete only when price closes outside the lines.

How we find it

The same code that draws it on your chart follows these steps, with the same result every time.

Find at least 3 touches on the upper line and 3 on the lower line.
Require both slopes to be negative and the upper slope to be steeper.
Require the lines to converge: the gap at the end is at most 70% of the gap at the start.
Mark complete when a close rises above the upper line by more than the margin.

Starting values: Touches per line 3; Convergence gap at the end at most 70% of the start; Margin 1.0%. These are proposed and will be tuned on real price data before launch.

How to read it

Red is the upper line, teal is the lower line.
The gold dot is the first close above the upper line.
The narrower the wedge, the closer price is to the apex.

Status labels you may see

Label	What it means
Forming	Price is between the lines.
Near the upper line	Within 2% below it.
Broken up	Closed above the upper line.
Broken down	Closed below the lower line.

What cancels it

A close below the lower line.

What traders check next

Volume through the wedge.
How near the apex price has moved.
Whether momentum is slowing.

Limits

Breaks can go either way.
Short wedges are noise.
Rules about slope and convergence are our own choices.

Try it in forecastviz

Open any ticker and choose Reversal patterns → Falling wedge in the left menu.
Switch between 6M, 1Y, 3Y to see how the picture changes.
Compare with Rising wedge and Descending triangle on the same chart.

Open on a ticker

Questions

Which way does it break?

It is often described as breaking up, but it can break down. We do not claim a rate.

How is it different from a descending triangle?

A descending triangle has a flat bottom. A falling wedge has a falling bottom.