What is Wedge pattern?

What does Wedge pattern mean in practice?

A rising wedge has both lines sloping up with the lower one steeper, and a falling wedge the reverse. The narrowing range shows momentum fading as swings get smaller, and a break through one of the lines is used as the trigger.

Patterns like this are easy to see in hindsight and hard to define in advance, which is the testing problem. Where the lines are anchored, how many touches are required and how close to the apex a break counts all change what the pattern is.

A worked example

Illustrative only: successive highs at 110, 108 and 106.5, and lows at 102, 101 and 100.5. Both lines slope down and converge, which is a falling wedge, and a close above the upper line would trigger the rule.

How to read or test it

Reduce the pattern to rules: how many touches on each line, how long it must last, how steep, and what counts as a break. Apply the rules mechanically to history so the pattern is not selected by eye. Count outcomes in both directions rather than only the ones that worked. A pattern that cannot be defined precisely enough for a program to find it cannot be backtested, only remembered selectively. Count the misses as carefully as the hits, since selective counting is how patterns look better than they are.

How AKQX handles Wedge pattern

AKQX does not currently list a wedge as a ready-made template. A wedge is hard to define precisely enough for a program to find, which is the main obstacle to testing it, so check the Strategy Builder in the app for what it currently supports.

See No-code algo strategy builder for the feature page.

A common mistake

Drawing the lines after the move, so every chart contains a wedge.

Related terms