How to trade the wedges

following rules only apply if a rising contracting wedge follows a falling contracting wedge or vice versa. In other cases (widening wedges, rising wedge followed by a rising wedge, falling wedge followed by a falling one slightly different rules of thumb apply):

1) the first point of contact often emerges from a break of another wedge. If you trade the break out work with tight stops or other indicators.
2) the second point of contact often emerges from a back-test of the break out. In such a case it is kind of easy to guess the point of reversal.
3) once the third point of reversal is fixed the fifth one is kind of easy to forecast. the third point itself is difficult to forecast. work with tight stops if you are involved.
4) similar story as for the third point: difficult to forecast, once fixed the final break out is kind of easy to forecast.
5) this one is actually the easiest to trade. you know kind of when to get out between 4 and 5 and you can enter the opposite position right away.

Obviously it is not always that easy. patterns are constantly changing.
- a point which was supposed to be one of the point of contacts might turn out to be nothing once a boundary line is broken.
- there is usually not only way to construct wedges, there are a lot more!
just to mention the two most important problems you might face.

good luck!