Introduction to the Wedge Trendlines Indicator
Price pattern trade setups such as wedge pattern breakouts have the potential to produce trades with very high profits. Traders who have mastered trading such price pattern trading strategy can potentially produce huge profits from time to time.
Let us take a look at the Wedge Trendlines indicator, which was intended to help traders identify such price patterns easily.
What is the Wedge Trendlines Indicator?
The Wedge Trendlines indicator is a custom technical indicator which was developed for the purpose of automatically identifying wedge patterns.
It plots diagonal trendlines which can form a wedge pattern, as well as an equidistant channel.
How the Wedge Trendlines Indicator Works?
The Wedge Trendlines indicator would identify major swing highs and swing lows based on the deviations of price movements.
It then connects the swing highs with other swing highs forming a diagonal resistance line. It also connects the swing lows with other swing lows in order to form a diagonal support line.
Although it does not always follow, the trendlines formed would sometimes form a wedge pattern which traders can use as a trade setup.
This indicator also plots an equidistant line based on the swing highs and swing lows which should cover most of the price action movements more often than not.
How to use the Wedge Trendlines Indicator for MT4
As mentioned earlier, the Wedge Trendline indicator plots trendlines by connecting prominent swing highs and swing lows. As such, it can be used to trade trendline breakout setups. Traders can trade on the actual momentum breakouts or wait for the pullback and rejection of the broken trendline to confirm the trendline breakout setup.
However, this indicator works best when the trendline breakout setup is also a broken wedge pattern. This adds another layer of confluence which does tend to produce high yielding trades.
It is also important to note that not all trendlines identified by this indicator are valid. Traders should still visually confirm the identified trendlines if it is a valid support or resistance line.
Buy Trade Setup
When to Enter?
Review the trendlines identified by the Wedge Trendlines indicator. Identify if a bullish wedge setup or price pattern is available. Open a buy order as soon as a bullish candlestick breaks above the resistance line with strong momentum. Set the stop loss on the support below the entry candle.
When to Exit?
Set the take profit target at a valid resistance level.
Sell Trade Setup
When to Enter?
Review the trendlines identified by the Wedge Trendlines indicator. Identify if a bearish wedge setup or price pattern is available. Open a sell order as soon as a bearish candlestick breaks below the support line with strong momentum. Set the stop loss on the resistance above the entry candle.
When to Exit?
Set the take profit target at a valid support level.
Conclusion
This indicator can be a useful indicator to help traders identify possible wedge patterns as well as other types of price patterns that are traded based on a diagonal trendline breakout. However, the possible patterns should still be visually validated by the trader in order to confirm if the pattern is a viable trade setup.
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