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A falling wedge is a chart pattern where price consolidates between two downward-sloping, converging trendlines, with the upper line falling faster than the lower one. It looks like a narrowing downward channel. It is generally considered a bullish pattern: even though price is drifting lower, selling momentum is weakening, and a breakout above the upper trendline often signals a move higher.

A falling wedge is usually bullish. It can act as a reversal pattern at the end of a downtrend or as a continuation pattern during an uptrend, but in both cases the expected breakout is to the upside. The converging, downward-sloping lines show sellers losing strength. The signal is confirmed when price breaks above the upper trendline, ideally on rising volume. It reflects probability, not certainty.

Traders typically wait for a confirmed break above the wedge’s upper trendline, entering long on the breakout or on a retest of that line as new support. A common target projects the height of the wedge (measured at its widest point) upward from the breakout, or aims for the start of the wedge. A stop-loss often sits below the most recent swing low. CFD trading involves a risk of loss.

Look for a series of lower highs and lower lows that fit between two downward-sloping trendlines that converge, with the upper line steeper than the lower. The price range narrows over time and volume often declines as the wedge develops. Distinguish it from a bear flag or channel by the converging, tilting lines. Confirmation comes only when price breaks out above the upper trendline.

A falling wedge has converging trendlines: the upper line slopes down more steeply than the lower, so the range narrows toward an apex, and it usually resolves bullishly. A descending channel has roughly parallel trendlines that keep an even width as price moves lower. The key distinction is convergence versus parallelism, which is why the wedge signals weakening downside momentum rather than a steady downtrend.

A frequent mistake is anticipating the bullish breakout before it happens, while price is still inside the wedge or even breaking lower. Traders also mislabel a parallel descending channel or a bear flag as a wedge, or ignore volume, which ideally expands on the upside break. Waiting for a confirmed close above the upper trendline, watching volume, and using a stop-loss reduces the chance of acting on a false breakout.