Wedge pattern signals
The Wedge binary option strategy is based on the formation of graphical analysis called Wedge pattern, which appears to look somewhat like a Triangle.
It is not an easy strategy to implement so we would recommend you starting it on a free demo account first.
The main difference between Triangle and Wedge lies in the fact that the Wedge has a more elongated shape and its top is inclined upwards or downwards. Wedge chart pattern occurs during different timeframes.
Wedge pattern formation
It is important to remember that the larger the time interval at which the Wedge is formed, the more values should traders betray to it. The graphic wedge pattern is formed when the rate of rise or fall in market prices is slowing down.
Thus the maxima still continues to be updated as well is the minima. But price is not able to grow or reduce strongly. That is the power of waning sellers or buyers (depending on what kind of wedge is formed).
Bearish Wedge pattern – Put option buying
In a bearish Wedge, sellers dominate in the market, and in a bullish one – buyers respectively. When a bearish Wedge graphic figure is forming in the market we should closely monitor, if the price breaks through the lower boundary of the figure, which we presume as a support line at the same time.
Once the support line is broken, we can say that a downward movement begins in the market.
At this point, the trader can buy a Put binary option.
However, it is desirable to wait for the price not only to brake the lower bound of Wedge graphic pattern, but also entrenched underneath. This would indicate that the pattern is finally formed and begins to work out.
Bullish Wedge pattern – Call option buying
The same can be said about the formation of an upward or bullish Wedge graphical pattern. At its formation, it is necessary to watch closely when the price exceeds the upper bound, which at the same time acts as a resistance line.
In this case we can say that bulls (i.e. buyers) in the market are beginning to occupy a dominant position. Upward movement formation begins.
At this point, the trader can buy a Call binary option.
Nevertheless, in order to be completely sure that an upward movement begins and traders can buy Call options, its best to wait until the candle closes exactly above the resistance line.
It is important to remember that if Wedge graphical pattern is formed as a continuation of trends, there will not be changes in the current trend. So if an upward bullish Wedge is formed in an uptrend, it will not lead to a change in the current direction and only indicates the continuation of the uptrend.
The same can be said about a bearish Wedge forming within a downward trend. It will not change the current signal and the downward movement will continue.