Trading is an ancient profession that has progressively evolved. Today, its transformation is evident in such a way that with a smartphone and an internet connection, you can trade the market from the comfort of your home. The act of trading is a learned skill that grows with time. You can learn various terms in the market, such as Hikkake pattern, indicator, charts, etc.
To trade the market efficiently, traders use various tools to analyze and predict the direction of the market. Importantly, candlestick patterns have become a vital tool that price action traders rely on when trading. Trading with metatrader indicators can be a daunting and confusing task with strange zigzag lines that is hard to interpret.
However, one tool that resonates with almost all trader is candlestick patterns. In this article, you will learn about candlestick pattern and understand the Hikkake pattern with an example. Peradventure this is your first time hearing about this pattern, then you are on the journey to increase your success rate when trading. Without further ado, let us begin.
What are the candlestick patterns?
Candlesticks chart gives information about the price of a currency pair. These candlesticks comprise of different components, which help describe the asset’s price movement. It describes the low, high, open and close of the price of a currency at a specific time. Usually, a candlestick pattern resembles a candlestick, which gave yield to its name. There are various candlestick patterns such as spinning top, Doji, morning start, engulfing, and Hikkake pattern.
Importantly, they have certain features that separate them from other charts in the market. These features include:
1. Packed with information
3. Represent the psychology of the market and emotions of both buyers and sellers
4. Useable for all forex timeframe
5. Usable as a form of technical analysis of price patterns
Structure of a Candlestick
Throughout ages, the structure of a candlestick pattern has remained the same. Its structure includes a low, high, open, and a close. The candlestick pattern is like combining a bar chart with a line chart, with each bar representing an essential piece of information.
Besides this, the candlestick also includes a body and a shadow. The body can be long or small; the long body indicates heavy trading activity taking place in a particular direction, whereas a small body represents a little or lighter trading activity between buyers and sellers. On the other hand, the shadow includes the upper and lower shadows, which indicate the high and lows of the market.
The Hikkake Candlestick Patterns
Price action traders take advantage of different candlestick patterns to trade the forex market. However, this requires constant practice to know when to enter or exit the market. It is an endless list to mention here, but we will unveil the Hikkake candlestick patterns that will help you during your trading.
The Hikkake pattern is not famous to many traders like the doji, engulfing, and spinning top candlestick patterns. However, traders and technical analysts use it to identify short-term moves of the market. The Hikkake candlestick pattern candlestick has two different setups – a short-term upward trend and short-term downward movement of price.
The pattern is a candle pattern, which begins to move in a direction before reversing quickly. With this, the forecast is that it is set to move in the opposite direction. In 2003, Daniel L. Chesler developed the Hikkake pattern, which has four key points.
1. The first two bars or candles of this pattern have a diminishing size. Mostly called harami or an inside-day candlestick pattern. Importantly, the pattern doesn’t take into consideration if it closes lower or higher than the opening. The main concern is that the previous candle body should overshadow the preceding candlestick body.
2. Furthermore, the third candlestick should close above the second candle or below the first candlestick.
3. The next one or more candle following the third candle will drift below the third candle, which may show a sign of change in direction.
4. The final candle will close above the second candle high or below its second candle low.
How important are candlestick Patterns
Today, scalpers, intraday traders, swing traders, and investors take advantage of candlestick patterns due to the following reasons.
1. Patterns are easy to identify, understand and implement
2. They provide detailed information about the current market situation and what buyers and sellers are doing including unique insights trading hours.
3. Candlestick patterns can be incorporate with indicators.
4. They help show market turning points early while estimating the overall direction of price.
5. The color and candlestick length allows traders to know if the price is bullish or bearish.
6. Can be used to predicate the market trend accurately. And works in all market situations.
7. They display reversal patterns, unlike other types of charts.
Closing Remarks On Hikkake pattern
The knowledge and understanding of candlesticks pattern is one that is invaluable because of its profit potential. Candlestick pattern is not a labyrinth that requires memorizing; with little effort, you can understand the trick behind trading candlestick pattern and use them for trading the market efficiently.
You don’t require investing months or years to become good at reading candlestick patterns. Although it has been in existence for over 300 years, the principles behind it remain the same. If you want to be a good price action trader, then candlesticks pattern is a compulsory “course” to learn. Trading is about having the right information and tools that work to your advantage.
The path to becoming a profitable forex trading is never an ending one; it is a journey rather than a destination. Therefore, while journeying on that path, it is essential to gather every knowledge you can and apply them when needful. However, not all information is relevant, which is why you have to stick to what works and follow those with evident results.
To help traders, we have developed profitable indicators and tools to make your trading experience seamless. Our indicators can help you identify candlesticks pattern accurately without having to seek a professional, so take a look at them through this link to help you with making profits.