Recently, when studying technical analysis, I thought of a quite basic but often overlooked chart pattern— the wedge. Actually, many people have heard of it, but not many truly understand what shape a wedge is or how to use it.

Simply put, a wedge is a special pattern formed by prices over a period of time, with two trend lines slanting in the same direction but with different slopes, gradually narrowing over time. This pattern comes in two types: ascending wedge and descending wedge.

First, let's talk about the ascending wedge. The price keeps making new highs and lows, but each high and low is higher than the previous one. Both trend lines slope upward, but the upper trend line is more gentle than the lower one. It looks like a gradually narrowing triangle. This pattern is usually seen as a bearish signal, especially when it appears in an uptrend. When the price finally breaks below the support line with increased volume, it’s a signal to short. Many traders seize this opportunity to enter short positions.

The descending wedge is the opposite. The price makes new lows and highs, but each is lower than the previous one. Both trend lines slope downward, with the lower line steeper than the upper one. What shape does this wedge resemble? Also a gradually narrowing triangle, just in the opposite direction. The descending wedge is often seen as a bullish signal, especially in a downtrend. When the price breaks above the resistance line with increased volume, it’s a buying opportunity.

I think the three most important points are: first, volume. During the formation of the wedge, volume gradually diminishes, but when breaking out, volume must increase to confirm the signal’s validity. Second, the time span. The longer the formation takes, the more obvious the move after breakout. Short-term wedges are suitable for quick trades, long-term wedges for medium to long-term trading. Third, don’t blindly trust the pattern. Although wedges are common, they are not foolproof; it’s essential to combine them with other technical indicators and market conditions for confirmation.

For example, a tech stock formed an ascending wedge last year, and after breaking below the lower trend line, it dropped sharply. Short sellers caught this opportunity. Also, a commodity formed a descending wedge early this year, and after breaking above the upper trend line, it surged significantly, profiting the long traders. This illustrates how wedges are applied in actual trading.

Honestly, understanding what shape a wedge is and how to identify it is just the first step. The real challenge is staying calm in live trading and executing strictly according to the plan. Set proper stop-losses, and base target prices on the height of the wedge—don’t be greedy. Combining volume, time cycles, and other technical indicators can improve success rates. If you’ve been watching the markets recently, consider paying attention to whether wedge patterns appear, and you can verify them on the corresponding trading pairs on Gate.