Trading The Hikkake Candlestick Pattern
The Hikkake pattern is a candlestick formation designed to identify turning points in market and prices. It is one of the few patterns which can be traded alone without confirmations from support and resistance, thus testifies its strength. Today we will explain how to trade this candlestick pattern.
What Is The Hikkake Pattern
Essentially, the Hikkake is a failed inside-bar pattern. The inside bar is a candlestick formation that occurs when a certain candle closes inside the range of its predecessor. A breakout of the range is confirming the Inside Bar trade.
The Hikkake trades on a failure of the Inside Bar, entering trade when the range is broken again, to the opposite side.
Psychology Behind The Hikkake
The failure of the Inside Bar triggers stop losses of traders which attempted to trade the Inside Bar, thus adding strength of the movement. The failure itself shows reflectance of traders to continue in the direction of the original breakout, so the Hikkake direction is favored.
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How To Trade The Hikkake
1. Spot an Inside Bar candlestick formation - Look for big candles followed by smaller ones that are inside their range.
2. Wait for a breakout of the range.
3. Set Trading Orders - Set orders to join the trade at the breakout of the range to the opposite direction.
4. Stop Loss - Place stop loss above the highest high of last 3 candles (for short), or below the lowest low of last 3 candles (for long). This ensures that stop loss is in a logical place, near Support or Resistance.