It’s true knowing how to trade the ascending broadening wedge chart pattern will make you a better trader.
The more patterns your eyes and brain master, the easier trading becomes.
Think about how less you’ll hover on charts before deciding whether it’s a good buying or shorting opportunity.
On the other hand, the ascending broadening wedge stats shows that this formation has an 81% chance of reversing a trend.
That’s quite high compared to other formations that spring up every now and then.
It can be said this pattern is totally worth the time and energy you’ll put into learning and mastering it.
Walk with me as I show you how to trade the ascending broadening wedge chart pattern.
What is Ascending Broadening Wedge?
The ascending broadening wedge is a formation where price spreads out as it rises.
The highs and lows diverge, hence this is a rising broadening wedge.
That’s the simplest explanation for it!
If these lines diverge, it means this should’ve been a higher high and lower low formation.
But that’s not the case!
It’s a higher high and higher low formation.
You could also say the resistance and support line face the same upward direction.
One end of the formation is small while the other end is extremely wide. It has a megaphone or inverted triangle shape.
And the difference in the shape of both ends classifies this pattern among wedges.
Which other wedges do you know?
There are the rising and falling wedges, as well as, the descending broadening wedge. But that’s not why you’re here!
Over and above that, this broadening wedge is an area of consolidation.
Volume within the pattern is irregular but tends to increase as price rallies toward the wedge’s resistance.
It is reported that this happens about 66% of the time.
The price action on this chart is an example.
The ascending broadening wedge can act as a reversal or continuation chart pattern.
In an uptrend, it reverses the trend. Hence, it is a broadening top formation calling the end of rallying prices.
And in a downtrend, the formation continues the bearish trend. It can be called a corrective move in such a trend.
Is Ascending Broadening Wedge Bullish or Bearish
The ascending broadening wedge is a bearish chart pattern.
It may look bullish because price keeps going up at both its highs and lows.
The only difference is, the resistance line is rising faster than the support line.
The steeper resistance line helps to tilt the pattern in an upward direction.
Aggressive sellers are not selling for less but buyers are less reluctant to pay more for the same asset. Even though buyers are paying more, they’re less enthusiastic to do so.
So, if you’re wondering, ‘is ascending broadening wedge going up or down?’ Its direction is upwards.
But pay close attention because price will break below the wedge’s support at some point.
That’s because less enthusiastic buyers will soon get tired of paying so much especially when prices keep getting extended.
Buyers can’t maintain these overbought levels and some traders would be willing to sell for way less.
That’s when everything comes crashing.
How to Trade Ascending Broadening Wedge Chart Pattern
Here are some of the best tips on how to trade the ascending wedge chart pattern.
- Choose a timeframe.
- Draw a trendline at the highs and lows.
- Trade from one key level to the other.
- Take your stop.
Let’s go through each of the steps above to show you how to trade with a broadening wedge pattern.
1. Choose a Timeframe:
The ascending broadening wedge is a pattern you can scalp or swing trade on different timeframes.
Timeframes between M5 to M15 will help you scalp the price action within this pattern.
Whereas M30 to H4 will enable you to swing trade each swing high or low.
Here’s an example using a Bitcoin 1-hour chart.
Whatever trading strategy you choose should be based on your level of trading skill.
It’s also worth considering how much free time you have on your hands.
That’s because you may have to sit at the screen all day if you choose to scalp. But that means more money to your wallet if you manage your risk accordingly.
I’ll also like to mention that the timeframe determines the trend you’ll be trading. It be short-term, medium-term, or long-term.
And most importantly, this is a pattern to look out for in an uptrend or bull market since that’s where they occur mostly.
2. Draw a Trendline at the Highs and Lows:
There are two easy ways to determine a pattern.
The first way is to study the structure of the highs and lows with your eyes.
And the second is to draw the trend of the highs and lows using a line tool.
In the second scenario, you’ll have to wait for the first two highs and lows of the wedge to be formed to actually know it’s the right pattern in formation.
Now proceed to map out these key levels on your chart once you’ve gotten the first two confirmations.
You know it’s an ascending broadening wedge if price is making higher highs and lows at a fast pace.
The highs are branching out faster than the lows are.
3. Trade from One Key Level to the Other:
There are three trading strategies for the ascending broadening wedge.
You can opt for one or all of these trading methods. They’re all profitable but their level of risk range from low to high.
What are these strategies?
- Long from support and take profit at resistance.
- Short from resistance and take profit at support.
- Wait for a breakout of the pattern.
Strategy 1: Long from support and take profit at resistance:
It’s as simple as it sounds since you can long Bitcoin, Ethereum, Shiba, etc. from support and sell at resistance.
At this point, I’ll like to believe you’ve gotten atleast two highs & lows, and drawn out the future price levels.
Now, wait for price to recoil from the third support.
It might form bullish signals like rounding bottom or double bottom at this support.
So keep a close eye!
The Bitcoin/USDT 1-hour chart below shows bullish and bearish candlestick patterns that’ll confirm your entry or exit from this pattern.
Strategy 2: Short from resistance and take profit at support:
It’s an uptrend and that means you’re better off staying on the long side.
However, you can still be profitable if you short this pattern from its highs to lows.
But this is a risky way to trade since you’re betting against the prevailing trend.
It’s possible price may not hit the support zone before reversing due to the bullish momentum.
With that in mind, look out for a double top or rounding top formation at the pattern’s resistance.
You might also come across the head and shoulders pattern in this area of value.
Here’s an example.
I moved to a lower timeframe just to spot the pattern at resistance. This is the 5-minutes timeframe of the previous chart.
Bearish candlestick patterns that’ll also confirm your short entry include the spinning tops, gravestone doji, shooting star, hanging man, and bearish engulfing.
If you’re wondering what the spinning top candle is doing among the list, it’s because it’s a small real body hinting at a change in bullish momentum.
Let’s assume you’ve taken a short, your profit target is the support zone hinted at by the wedge’s trendline.
Check the Bitcoin/USDT 1-hour chart below. It shows key levels to long/short and take profit using this inverted triangle pattern.
Strategy 3: Wait for a breakout of the pattern
Trading the ascending broadening wedge breakout is also a good strategy to employ.
It’s less risky but just as profitable. You also get to spend less time on the screen.
So how do you begin?
Wait for a candle close below the wedge’s support.
You may have to confirm a breach of support from a higher timeframe such as H1, H3, or H4.
There could be false breaks or breakouts.
Hence, you need to reduce the chances of getting into one to the bare minimum.
And that’s by confirming if support is still intact from a higher timeframe.
You can then proceed to short the breakout and target the minor horizontal support zones in the pattern.
But more about that later.
The Bitcoin/USDT 1-hour chart below shows a breakout from an ascending broadening wedge.
You could short the first breakout and then place a stop at the candle’s high.
Another option is to short after the consolidation zone and then place a stop at the zone’s high.
4. Take Your Stop:
A stop loss would cut your losses on time especially if you’re trading against the trend.
The same goes if you get stuck in a false break or breakout.
For strategy 1, where you’ll be longing, a stop can be placed a few distances away from the lows of the candles.
This is the low of the candle in the region you’re making your entry.
It’s important not to place this stop exactly at support. Or even a psychological level such as a round number.
This is to prevent your stop from getting hit often.
For strategy 2, where you’ll be shorting, a stop can be placed above the highs of the candles.
And finally, strategy 3 requires placing a stop at the previous lower high before the break.
Price may retrace back into a trend after the break and then break out again.
This could happen due to high volume or momentum. Thus targeting the previous high as an exit zone could keep your trade intact.
But note that it could increase your stop loss margin even though not significantly.
Ascending Broadening Wedge Breakout Target
The ascending broadening wedge pattern breakout target is one key element to understand.
It gives you an idea of how far price may travel after breaching its support (or resistance).
Therefore, you can calculate your risk to reward before taking the trade.
Here’s how to determine the breakout target.
- Find the support and resistance levels within the pattern.
- Determine the pattern’s length from the start of the wedge.
What does each of these entail? Read on to find out!
1. Find the Support and Resistance Levels Within the Pattern:
There are minor support and resistance levels within and outside the ascending broadening wedge.
These are key levels that would post temporary obstruction to price.
The levels may hold or be breached depending on the selling pressure.
Therefore, you can use these levels as your profit target.
Another way to take advantage of them is to place your stop loss above the level once prices breaches it.
2. Determine the Pattern’s Length from the Start of the Wedge:
It’s possible to determine an ascending broadening wedge’s price objective by measuring the length of the move to the top of the pattern.
Here, you’ll draw a vertical line from the lowest low (lowest valley) where the price action began to the highest high of the pattern.
The height gotten from this measurement can then be used to predict the future price.
It’s worth noting that the steeper the degree of rise of the pattern the faster price will hit its target after a breakout.
This can be tied to the sharp increase in volume when price finally leaves the constricted zone.
Ascending Broadening Wedge Stats
The ascending broadening wedge stats are quite impressive.
It says a lot about this formation as a reversal pattern. And much more, why it’s important for any trader to master its use.
Here are some statistics of this chart pattern after an uptrend.
- There’s an 80% chance for a downward breakout to occur.
- 75% of the time this formation acts as a reversal pattern.
- 81% of the time this pattern can continue the trend if there is an upward breakout.
- 60% of the time the pattern hits its target after a break of the support line.
- After a breakout, price retests the pattern’s support (now resistance) 20% of the time.
The ascending broadening wedge stats after a downtrend is as follows:
- There’s a 79% chance for price to breach the pattern’s support.
- 81% of the time the pattern hits its target after a break of the support line.
- After a breakout, price retests the pattern’s support (now resistance) 40% of the time.
- 23% of the time, the pattern forms a consolidation zone.
Ascending Broadening Wedge Examples
Here are some examples of the ascending broadening wedge candlestick pattern.
Example 1: Ascending Broadening Wedge Pattern in an Uptrend
In the Ethereum/USDT 30-minute chart below, price fails to hit the channel’s resistance a fourth time.
This partial advance shows bullish momentum is waning and a possible break of support at the next attempt. It’s also your cue to take a short.
But if you do wait until the wedge’s support is breached and retested, an entry can be made on the third candle of the 3-bar play formation. And a stop loss placed above the resting bar.
If you’re concerned about stop hunts you could place your stop at the previous high.
The outlined target can serve as your price objective. The target was determined by measuring from the lowest low to the highest high in the formation.
Example 2: Ascending Broadening Wedge Volume Breakout
Here’s an Ethereum/USDT 30-minute chart.
The chart shows how price often created small candles when it approached resistance or support.
These small candles hinted the bearish or bullish momentum at the region is reducing, hence price could reverse.
However, on the last attempt price struck support on high momentum candles. These large candles led to the level’s breach.
Another clue to the support’s breach was from the internal trendline. That’s a key level given how many times price retested it.
Price also consolidated temporarily on the line before breaching it. The consolidation zone provided a good place to short to and set a stop.
Example 3: Ascending Broadening Wedge Chart Pattern Retest
The ETH/USDT 30-minute chart below shows a higher close was not formed at the extremes of the pattern.
Instead, price created same highs.
This double top was a call for caution since a close below the neckline could tank prices lower. And this is what happened.
On the other hand, an entry could be made on retest of the trendline.
Frequently Asked Questions
1. Who Discovered the Ascending Broadening Wedge Pattern?
Thomas Bulkowski can be said to be among the first discoverers of this pattern.
The writer, in his book, Encyclopedia of Chart Patterns Second Edition gave an overview of broadening tops and bottoms.
You may want to check the book out since it outlines a list of chart patterns.
Another great read is Steve Nison’s book on Japanese Candlestick Charting Techniques.
2. Difference Between Ascending Broadening Wedge and Broadening Pattern
It’s quite easy to mistake the ascending broadening wedge with a regular broadening pattern.
That’s because they both have a widening channel.
But these are two different patterns.
The wedge is the difference.
And that is why the ascending broadening wedge has both its support and resistance lines tilting upwards.
In contrast, the broadening pattern has the support line facing downwards. The resistance line points upwards.
The broadening pattern can be called a reverse symmetrical triangle formation.
Here’s a Bitcoin/USDT 5-minutes chart showing a broadening pattern.
3. What’s the Difference Between Ascending Broadening Wedge and Rising Wedge?
The difference between an ascending broadening wedge and a rising wedge is in how their apex and end form.
While both patterns point upwards, the former diverges while the latter converges.
As such, a broadening wedge is wider at its ends while a rising wedge is smaller at its ends.
Both patterns, however, have a bearish outcome. They tend to have a downward breakout.
And like most patterns, this breakout direction may not always yield since price could break in the opposite direction.
But that’s in rare cases.
The Bitcoin/USDT 5-minute chart below is an example of a rising wedge with a bullish breakout.
That upward break does not come as a surprise since the pattern was formed after an extended downtrend.
Hence, it acted as a reversal pattern.
4. What’s the Difference Between Ascending Broadening Wedge and Ascending Triangle?
There’s a significant difference between an ascending broadening wedge and ascending triangle.
That’s because the former has diverging lows and highs. And that yields higher highs and higher lows.
The latter, on the other hand, has same highs but higher lows. Thus, it has static resistance and dynamic support.
Also, the breakout direction of the broadening wedge is downwards while the ascending triangle has an upward breakout.
5. Difference Between Ascending Broadening Wedge and Rising Channel:
The ascending broadening wedge and rising channel are very similar.
Both lines of the pattern face the same direction.
For this reason, you could mistake one formation for the other.
The disparity between both formations is in the degree of rise.
A channel has its highs and lows rise at the same pace.
Hence, both lines have an equal distance from each other.
Check this detailed post for on how to trade the rising channel pattern.
The Bitcoin/USDT 5-minute chart below is an example of a rising channel.
6. Do Ascending Broadening Wedges Appear in Bull or Bear Markets:
Ascending broadening wedges mostly occur in bull markets.
They hint top prices have been hit hence the trend could reverse.
Nevertheless, there are rare cases where these patterns spring up in downtrends.
You’ve learned how to trade the ascending broadening wedge chart pattern using three strategies.
Which strategy stood out to you and which are you most likely going to employ?
Don’t be too quick to answer!
First, demo trade each strategy to determine their risk to reward.
If one trading strategy yields more profit but puts you in a position to lose more money, then it’s not ideal.
And if it has the least risk but means low earnings, you might also want to reconsider.
At the end of the day, choose a strategy that’ll enable you to earn at least twice the amount you could lose.
That’ll ensure you make up for losses even if your stop is hit more often than the take profit price.
The ball’s now in your court.