Falling Wedge
In simple terms
A falling wedge is a chart pattern that looks like a triangle getting narrower from top to bottom. Even though the price keeps hitting lower peaks, the pattern suggests the price is about to bounce back up—think of a ball rolling down a funnel and getting ready to pop out the bottom.
Definition
Bullish structure where price makes lower highs and lower lows but converges.
In depth
A falling wedge is a bullish continuation or reversal pattern characterized by price action that creates a series of lower highs and lower lows, with both the upper resistance line and lower support line converging toward a point. The pattern reflects decreasing volatility and weakening selling pressure as the wedge tightens, typically resulting in a breakout above the upper trendline. Volume generally diminishes as price compresses, then expands upon the breakout, confirming the bullish resolution. Traders use this pattern to identify potential entry points near support before an anticipated rally.
How does Falling Wedge work?
Price makes lower highs and lower lows, but the highs fall faster than the lows, so the two downward-sloping trendlines converge. Each decline covers less ground than the one before, which chartists read as selling pressure fading even as price drifts down. Volume usually contracts as the wedge tightens. The pattern resolves when price closes outside a boundary; a break through the falling upper line is the more commonly cited outcome. The wedge's widest vertical height, added to the breakout point, gives a rough reference. Downward resolutions and drifts into the apex without a clear break also happen.
An example
Illustratively, a token's highs step down $50, $44, then $40 while its lows step down $38, $36, then $35, narrowing the range from $12 to $5. A close above the falling upper line near $40 projects roughly $52 as a rough reference, using the $12 widest height. If the lower line gives way instead, the pattern has failed. These are illustrative figures only.
Figures are illustrative only.
What beginners get wrong
- Confusing a falling wedge with an ordinary downtrend channel is common, because a channel holds a constant width while a wedge narrows.
- Acting inside a wedge that is still forming means the downtrend remains intact, and the pattern can keep making lower lows for weeks.
- A break above the upper line on almost no volume is weak evidence, and such breaks frequently fail back into the wedge.
- The pattern says nothing about timing, so wedges can drift all the way to their apex and fizzle without any clear resolution.
Related terms
Part of
What is technical analysis, and how are crypto charts read? — the subject page for technical analysis, with all 29 of its definitions in one place.
Educational only — not financial advice.