The Ascending Triangle vs Rising Wedge Patterns in Trading Strategies: Key Differences
When buyers and sellers fight for dominance in the trading floor, they leave footprints on charts that technical analysts can use to predict the outlook of price movements.
Consolidation ranges, breakouts, triangles, flags, etc. There is a wide number of figures to pick from.
For experienced traders, these figures improve their strategies and boost their earnings. But for beginners, not being able to correctly identify the intricacies within the patterns they encounter leads to costly errors.
In this article, we’ll explore the differences between the ascending triangle and rising wedge patterns.
Two distinct candlestick figures. Two different psychological reasons behind their formation.
By the end of it, you will be armed with better skills to identify each one of them in your technical analyses and understand how they forecast vastly different probabilistic outcomes.
How to Instantly Distinguish Chart Patterns in Trading
Knowing how to distinguish the ascending triangle pattern from the rising wedge pattern separates a winning trade from a losing trade.
Each pattern develops under similar conditions, but the price action it precedes can be that of reversal or continuation, depending on the figure.
To better help in your daily analysis, the bulleted items below serve as a checklist to define if the pattern you’re seeing in your charts is truly the one you think you’re spotting.
The Ascending Triangle
- The upper boundary is a flat line with at least 2 relatively equal highs.
- The lower boundary is a positively sloped line that connects a sequence of progressively higher lows.
- The overall shape looks like a right-angled triangle pointing to the right.
- Buyers aggressively attack the flat supply line at the ceiling of the triangle.
The Rising Wedge Pattern
- The upper boundary is a positively sloped line connecting progressively higher highs.
- The lower boundary is a positively sloped line that rises at a steeper angle compared to the upper boundary.
- Overall, both trendlines ascend together to create a narrowing cone directed upward.
- Buyers will struggle to establish new highs, which in turns leads to momentum exhaustion.
The Ascending Triangle Pattern: A Bullish Continuation Pattern
In general, the ascending triangle is among other bullish patterns.
It is a trend continuation setup that appears in the middle of an already established uptrend. It represents institutional accumulation, where the resistance line represents a zone of concentrated supply.
Every time the price hits this level, sellers push their orders into the market to push the asset back down.
But, during each pullback, buyers step in and demonstrate urgency. This behavior creates higher lows, which connect a rising support line, showing that demand is stronger than supply.
Sellers keep stuck at a specific price zone, while buyers show they’re willing to pay even higher prices just to accumulate more shares. A clear display of bullish strength, which the pattern signals.
At the end of it all, when buyers absorb the entire block of sell orders, the liquidity drains down.
The lack of any remaining supply fires up a bullish breakout of the pattern. Short-sellers panic and algorithms flood the market with buy orders, which only fuel the move up.
The Rising Wedge Pattern: A Reversal Pattern
One of the key differences between the ascending triangle and the rising wedge is how the latter is a more complex formation compared to the former.
For the untrained eye, it can look very bullish. But this is by far one of the most deceptive formations out there.
Beginners often commit the mistake of entering a position on the opposite side of momentum because they’re not able to realize this pattern is a display of trend exhaustion.
Prices form a sequence of higher highs and higher lows, forming two upwards-converging lines. Although these highs may make it seem like the sentiment is bullish, the converging lines show that the advance is becoming harder to sustain.
Buyers push the price past the previous peak, but sellers walk in to instantly pressure it back down.
We actually have a name fome this, momentum decay.
Eventually, the market will run out of players willing to keep buying at elevated regions. The price then inevitably collapses. Buyers end up panicking, stop-loss orders are triggered, and the downtrend becomes even more violent.
Rising Wedge vs Ascending Triangle: Key Differences
To put it very simply, the ascending triangle pattern signals a breakout to the upside. It shows us what happens when bulls keep constantly attacking a resistance line with increasing strength.
On the other hand, the rising wedge is a potential reversal pattern with a bearish outcome. This patterns indicates what happens when buying power decays quickly.
| Ascending Triangle | Rising Wedge | |
| Upper Boundary | The ascending triangle has a horizontal resistance barrier. Bears keep unloading supply at a fixed price level | Moves upwards alongside the lower boundary within the wedge formation. Definitely not fixed |
| Market Psychology | Represents buyers constantly and aggressively attacking a visible barrier | The rising wedge is generally a result of a market slowly crawling up a steep hill, until buyers can no longer move up due to exhaustion |
| Internal Mechanics | Building tension between a fixed resistance and an ascending support line | Buying power deteriorating as the magnitude of new highs within the pattern diminishes |
| Directional Signal | Bullish formation. Forecasts a breakout to the upside | Bearish formation. Forecasts a trend reversal |
Trading an Ascending Triangle in an Uptrend
Spotting candlestick chart patterns is not always an easy task. Luckily, TradingView has some of the best indicators for swing trading. For the purposes of this demonstration, I will be using the Ascending Triangle detector indicator built by the community.
Observe the daily chart for AMD. You can easily spot two highs at the exact same spot, where the upper boundary of the triangle is formed. Moreover, we can see the higher lows, forming the support line. These trend lines form the basis of our triangle.
As soon as the price breaks the upper boundary, you can see how buyers are able to push prices up.
Pay close attention to the volume. It starts out high, then reduces significantly while the triangle is forming. When the pattern is completed and the price breaks the resistance line, the volume spikes back up.
Now, for this specific example, an aggressive trader would go long as soon as the price breaks out. A conservative approach would require a retest of the resistance level now as a support level. As you can see, that didn’t happen in this specific scenario. Bulls pushed prices so violently that we had four sequential gaps.
Regardless, both the L1 and L2 lows would offer key zones for stop losses.
Trading a Rising Wedge in a Downtrend
The rising wedge is a bit more tricky to spot than the ascending triangle. A lot of these take a much longer time to form, so you’ll find that automated indicators end up flagging a lot of false positives that would keep you trapped in the opposite side of momentum.
In this case, I spotted a rising wedge in the daily price of Bitcoin. It formed from about July to December 2021. So maybe using a weekly chart would make it easier for you to visualize these patterns without relying on indicators.
You can see how prices rapidly dropped down when the support zone was lost.
In this specific scenario, conservative traders would be able to go short when prices pulled back up right before dropping down again. Although not exactly a text-book example for a pullback, its peak also offered a cheaper stop loss price zone, in case things went wrong.
Pros and Cons of Each Pattern
Although these two patterns may look similar, they’re vastly different. Let’s take a look at the benefits and the challenges each one of them possesses.
The Ascending Triangle
It has a high statistical reliability. In favorable conditions, breakout probabilities are beyond 63%. The flat resistance zone gives us an unambiguous validation level, and the sequence of higher lows offers logical spots for placing our stop-loss orders.
However, beware of algorithms frequently targeting the flat resistance level to create bull traps.
The Rising Wedge
The main benefit of this pattern is allowing you to identify early reversal signals. The divergent slopes give you the chance to catch exhaustion early on. There are outstanding risk-to-reward ratios for short sellers, especially those who are more aggressive.
The resistance line also provides a tight level for stop-loss orders.
On the other side. One of the main setbacks is that drawing the exact slope of two diagonal lines introduces a lot of subjectivity. Rising wedges are definitely hard to spot. There are a lot of frequent shakeouts and false breakouts, and automated indicators have a hard time identifying them as well. Not to mention that shorting into an uptrend carries a lot of danger, since any unexpected volatility can trigger short squeezes.
Conclusion
As we reach the end of this article, I hope the differences between these two chart patterns have become clear enough to be helpful in your trading decisions.
The ascending triangle is all about accumulation and absorption of demand. These factors lead to a high-probability bullish continuation.
The rising wedge is an indicator of momentum exhaustion and fragility. It is a warning that the market is struggling and buyers might not be able to maintain prices any higher.
To get the best of these figures, traders can make use of trading volume and other indicators to better read price action. Never neglect the role that volume profiling has in validating institutional participation. In general, you must look out for volume contraction during the formation phase and explosive volume upon the breakout.
I am certain you’ll be able to improve your entry and exit points in your trading activities by adapting these and other popular candlestick patterns to your trading system.
Never forget to keep a strict risk management and use stop loss orders to protect against unexpected volatility. Keep a trading journal and iterate over your risk parameters. With that in mind, you will definitely maintain an advantage over the competition.