If I could day trade with any strategy for the rest of my career it would be a price wedge.
No, it’s not because price wedges are easy to draw, and it’s not because price wedges occur more frequently than any other price structure…it’s because of the market personality, which makes it very easy for me to anticipate what will happen BEFORE it does.
In order to use price wedges in your trading strategy you need to understand what a price wedge looks like. The physical structure of this pattern is very easy to define, easy to draw with trend lines, and easy to recognize by even rookie day traders.
A sideways price wedge forms when a sideways range starts to get more narrow. Lower highs, higher lows, and the ‘trigger line’ is often flat, with very little slope. A sideways price wedge tells me to buy the lows, sell the highs, and avoid the middle. It also tells me that I have the same opportunity buying the lows as selling the highs, there is no directional ‘bias’ making one direction (long or short) higher percentage than the other. As long as you stick to buying the lows and selling the highs you are going to be seeing a ton of success day trading this strategy with a sideways price wedge.
A bullish price wedge is when we have a bullish price channel and then we start to see lower highs (not testing the price channel highs) and the lows stay at the price channel lows. My day trading strategy using price wedges tells me that the LONG side is the higher percentage trade, think about the BULL price channel. So I will buy the lows of the price wedge for the best opportunities when I see a bull price wedge. You can also use the Dollar index day trading strategy as a correlation to help you look for the best times to use this price structure.
A bearish price wedge is the exact opposite of the bull price wedge and completes your price wedge day trading strategy. A bear price wedge is formed when a bear price channel starts to show higher lows. A bear price wedge tells me there is a ‘directional bias’ to the SHORT side, so look to sell the highs of this price wedge for the highest percentage trades.
Now that you know what a price wedge LOOKS like, now lets remember WHY we love these patterns so much. The market personality is the BIGGEST reason that every trader should have this in their trading strategy.
What does a price wedge tell us? It tells us that there is CONFUSION or lack of CONFIDENC, lack of DIRECTION higher or lower. This confusion, or lack confidence is exactly why you will always here me say…
“price wedges always tell me to expect fake-out breakouts because the price wedge itself confirms lack of direction”
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