Wedges are of two types: either rising or falling. There is a saying that a rising wedge is falling and a falling wedge is rising, and this is true but it should be treated with caution as wedges sometimes are not reversal patterns. However, there is the possibility to look for the measured move, and this is the main reason I decided to use wedges in showing you examples to be used when trading binary options.
A rising wedge is formed normally out of five different waves of a lower degree, typically coming in the form of an ending diagonal. This makes the inner structure of the legs of a wedge to resemble more to a correction than to an impulsive move, so any different labeling should be considered incorrect.
Because of the fact that wedges are having a five waves structure but the inner structure of each level is corrective, we have a competitive advantage when trading wedges with binary options. Even in a wedge, the third wave cannot be the shortest one, so in order to apply this when trading binary options is to measure the length of the third wave, project it at the end of the first wave and that is the maximum length for the fifth to come. Than, considering the fact that wedges are traveling between a line drawn from the end of the second wave to the end of the fourth wave and from the end of the first wave to the end of the third wave, then we have also the estimated time when such a wedge would reach a specific level.
For a falling wedge conditions are similar, just that a falling wedge is pointing to the downside, when compared to a rising wedge.
The recordings that come with this sub chapter will deal with multiple examples involving wedges, both rises and falling, and basically will get you familiar with these patterns which are extremely common technical analysis price structures.