Ascending Triangle Vs Rising Wedge: What's The Difference?

Introduction to directional Ascending Triangle vs Rising Wedge

If you were a fan of geometry in high school math, trading triangle wedge patterns should come naturally. These interesting formations appear regularly across all time frames with precise entry/exit parameters. Triangles and wedges consist of the price converging between two lines. Although triangles and wedges look pretty similar, there are some notable differences.

Generally, we regard triangles as continuation patterns, while wedges are reversal patterns. Let’s go through both of them in more detail.

What is the difference between Ascending Triangle vs Rising Wedge

Another way to tell the difference between these triangle wedge set-ups is the intent. A triangle is a continuation pattern, meaning that you expect the price to break out and move in its predominant direction. Conversely, a wedge suggests a potential reversal, implying that the market may travel in the opposite direction.

Of course, two types of triangles and two types of wedges appear.

Ascending Triangle vs Rising wedge

What is an Ascending Triangle?

This is a triangle pattern that appears during a bullish trend. Here, the price forms several higher lows while the highs bounce off a resistance zone. Eventually, the buying strength is enough to break this upper level, resulting in the trend presuming its direction at an accelerated pace.

This pattern has simple entry and exit parameters. The rule of thumb is to enter the position once the price has broken out of the resistance. For extra confirmation, you’ll want to see a bullish candle close to prevent a false breakout.

Traders place the stop loss below the last low that touches the trend line. The minimum profit target is the triangle’s height distance.

Drawing the Ascending Triangle is simple. Firstly, identify an existing uptrend where the price is in a consolidating phase. Here, you can map out the upper and diagonal (usually angled at around 40 degrees) trend lines. Ensure at least three swing highs/lows touch both to confirm the pattern.

The image below demonstrates all these factors for better understanding.

What is a Rising Wedge?

The Rising (or ascending) Wedge is a bearish reversal pattern (however, it can act as a continuation set-up depending on formation). It consists of two slanted trend lines that contract the price towards a vertex. With this pattern, the market is rising, making higher highs and higher lows as expected. However, the depth of the highs and lows becomes compressed to a corner, where we anticipate a breakout.

The rising wedge has the same entry and exit parameters as the Ascending Triangle. Again, it’s best to enter the set-up once you observe a full-bodied bearish candle outside the wedge to lower the chances of a failed break.

Traders place the stop loss above the first high on the trend line. The minimum profit target is the height distance of the wedge.

Similarly, drawing the rising wedge is straightforward. After identifying an uptrend, look for a slanted, tight structure between the highs and lows. This is where you draw your trend lines (angled at about 45 and 10 degrees each), ensuring each line touches at least three points.

The image below demonstrates all these factors for better understanding.

Now that we’ve covered the Ascending Triangle vs Rising Wedge discussion, let’s look at the opposite part.

Descending Triangle vs Falling wedge

What is a Descending Triangle?

The descending triangle is a pattern that appears in a bearish trend where the market produces consecutive lower highs while the lows stall at support. At some point, the selling power causes a breakout at this lower level. The price continues in the direction it moved previously, often in a parabolic fashion.

Like other wedges and triangles, the descending triangle has clear guidelines on entry and exit. Firstly, you wait for the price to close below the breakout or support line confidently. You should place your stop loss at the nearest high on the sloping trend line. The minimum profit target is the triangle’s height distance.

Plotting this pattern is effortless. First and foremost, ensure a clear existing bearish movement with a period of tight consolidation. This is where you can use trial and error to draw the trend line (which should be at around a 40-degree angle) and support line. Of course, you need at least three pivot points on either line to validate the pattern.

The chart below displays all these elements for better visual comprehension.

What is a Falling Wedge?

A falling (or descending) wedge is a bullish reversal formation (but can also act as a continuation pattern in some cases). It has two diagonal lines converging to a vertex with the price in between.

Here, the market is declining, moving in its typical lower-low and lower-high structure. Yet, the magnitude of the highs and lows contract to a corner. It is at this point that traders anticipate a bullish breakout.

You enter this pattern after the price has closed assertively (with a defined bullish candle) outside the wedge. Traders place the stop loss above the nearest low on the trend line. The minimum profit target is the height distance of the wedge.

When drawing the falling wedge, first spot an existing downtrend on your chosen time frame. Like most geometric-based patterns, you’ll often use a ‘cut and try’ approach. The key is your trend lines should be angled at roughly 45 and 10 degrees, respectively, to maintain the wedge shape. Also, each line should have a minimum of three swing highs/lows.

The image below shows all these elements for clarity.

What do these patterns tell us?

Triangle wedge formations indicate consolidation periods in the markets. Even in strong trends, the price will eventually stray away from its typical high-low structure. Let us take the falling wedge, for instance. While the pattern is forming, we assume the bearish trend is still intact, with more sellers than buyers.

Yet, a point arrives where an increasing number of buyers come in. You will notice that the lower highs become shallower, closing at almost the same level. The last point on the wedge is a ‘trick’ that ‘fools’ traders into thinking the downtrend has resumed, only for the price to move in the opposite direction.

Consolidation usually occurs for two reasons. Firstly, traders are taking profits by closing their positions. This causes the price to retrace since fewer buy or sell orders are present than initially.

The second more significant reason is indecision. Once a ‘big move’ has happened, everyone is eager to know whether it will move in its previous direction or go in a new one. For the so-called ‘smart’ money or institutional traders, it’s an opportunity for accumulation or distribution as they enter larger positions. This happens at the last phase of triangle wedge patterns.

This is where some traders assume the price is moving in a new direction (for triangles) or the old direction (for wedges). It is believed that smart money needs these opposing orders to strengthen their own, causing the breakout.

The whole point of triangle wedge patterns is that consolidation is necessary because of the natural market order. It is rare to find moments where the price moves in a relatively straight line with shallow or retracements. A pause is innate for securing profits and determining the next direction. Of course, the market consolidates in various patterns (like double tops/bottoms and flags), one being triangles and wedges.

What is needed for a triangle and wedge to appear

The primary component of triangle wedge set-ups is a well-defined trend. In most cases, these are easy to spot with the naked eye and don’t need any technical tools. Once you have identified a trend, it’s time to plot the consolidation with the trend lines. As previously mentioned, trial and error is necessary to confirm these patterns. The most crucial aspect is connecting the swing highs/lows on the trend lines. Like an ordinary trend line, connect at least three of these.

Another essential point to mention is the angles of the trend line for the wedge. It is easy to draw a flag or channel instead of a wedge due to misaligning the gradient. 10 and 45 degrees are the approximate angles to produce the sloping direction.

Why traders fail to tell the difference

The visually similar structure is the main reason someone may struggle to differentiate between a triangle and a wedge. From afar, both patterns are technically triangular in shape. Yet, closer inspection will show you that regular triangles have a flat line. On the other hand, wedges have two diagonal lines.

Another reason is that we have a third type of symmetrical triangle. This pattern looks more strikingly similar to a wedge because it also has two converging diagonal lines. In fact, it’s easy to confuse the two or assume they are the same thing. However, the difference is that the two trend lines are wider apart on symmetrical triangles, while they are narrower on wedges.

Next, we’ll cover symmetrical triangles and compare them to their counterparts.

Symmetrical Triangle vs Wedges

A Symmetrical Triangle is characterised by two intersecting trend lines connecting successive highs and lows. Unlike a wedge, the slope of the trend lines is close to equal (hence symmetrical), which is one of the primary differences.

The next difference is that we can interpret symmetrical triangles as a continuation or reversal pattern, making it a neutral pattern. Contrarily, we generally regard wedges as reversal set-ups. When a symmetrical triangle has formed, traders can expect the price to move in either direction. Other than these contrasts, everything else with symmetrical and regular triangles regarding entry and exit parameters remains the same.

To prevent confusion and keep things simple, some traders may only choose to hunt for triangle set-ups and disregard wedges. This would include symmetrical and regular triangles. In this way, they cover potential reversals or continuations without a different pattern with similar features.

Let us look at chart examples of symmetrical triangles to see how they differ from wedges.

Like other triangle wedge patterns, symmetrical triangles provide clear take profit and stop loss placements, along with a simple entry strategy. They are also straightforward to identify with a bit of experience. Another benefit is that breakout trading produces strong, momentum-filled movements.

Still, like other shape-based chart patterns, symmetrical triangles have flaws. A common problem with these formations is false breakouts, which you can’t always prevent. This is why you should apply a stop loss so that you don’t lose much if the set-up goes against you. However, you can improve your success rate by implementing particular tools to better confirm the breakout.

The other challenge is that you may need a larger stop loss, depending on the height. Yet, there is an entry technique you can implement to improve your risk-to-reward here.

All of this and more will be covered next.

Strategies and Tools to Max the Pros and Min the Cons

Let us look at the various techniques you can implement to trade triangle wedge patterns.

Momentum Indicators

A breakout requires strong momentum. So, this is why using a momentum indicator or oscillator like the Relative Strength makes sense. Here, you simply observe scenarios where the tool shows overbought (above 70) and oversold (below 30) conditions.

Traders usually assume the price will correct itself when this happens, but it can also mean it will continue trending. This dynamic works well with chart patterns like triangles and wedges. Once the market breaks out of the triangle, you can observe if the RSI is above 70 or below 30.

Let’s look at the recent symmetrical triangle example for demonstration.

Alternative Entry Method

Most breakout chartists suggest entering immediately once the price goes out of a triangle and wedge. While a decent technique, false breaks are more likely, which prevents many from trading breakouts. A simple workaround to this problem is waiting for the price to test the ‘backside’ of the trend line. This is where you can leave a pending order at this level.

The only drawback with this method is you will miss some opportunities because the market doesn’t always pull back. On the plus side, you will experience fewer false breaks.

The chart below is from the descending triangle covered earlier. Note how the market retraced back to the support line after the breakout before continuing further downwards.

Price Action

There is nothing like good ol’ price action when viewing triangle wedge set-ups. You can use it as additional confirmation of your trading bias and entry trigger. Traders look for specific candlestick patterns like pin bars, engulfings or simple Marubozus. The point is that you look for a signal that suggests the price will move in a certain direction.

For instance, seeing a full-bodied bearish candle break out of a triangle/wedge implies the emergence of sellers. At this point, the market will likely trend downward for some time.

Let’s look at an example combining the alternative entry technique mentioned earlier and price action.

Here, the price broke out of the triangle forcefully, judging by the bearish Marubozu. The only problem is that your stop loss would have been far, given the distance of the candle from the line. Yet, the market retraced towards the line and printed a bearish engulfing candle. This would have allowed a more optimal entry and a tighter stop placed above the pattern’s high.

Symmetrical Triangle Theory "STT"

The STT is our unique strategy allowing traders to enter triangle wedge set-ups before the breakout. It uses a sublime understanding of the mechanics of market structure. Most triangle wedge strategies need traders to wait for the breakout before the entry. However, your stop loss often needs to be larger. Fortunately, using the STT offers a tighter stop, resulting in a better risk-to-reward.

Closing thoughts

Let’s conclude our Ascending Triangle vs Rising Wedge discussion. Triangles and wedges are visually similar chart patterns. The main differences are:

Triangles are generally used for continuation set-ups, while wedges signal reversals.
A triangle has a diagonal and horizontal line, while a wedge has two diagonal lines.

Symmetrical triangles are the only triangles that function as continuation and Reversal Patterns. Although they look like wedges, their diagonal lines are of almost equal slope and are wider apart.

Triangles and wedges are an interesting display of market consolidation. When combined with the other methods we discussed, like price action and STT, they can offer excellent trading opportunities.

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Ascending Triangle vs Rising Wedge: What’s The Difference?