Hello, dear readers.
Traders in financial markets are in pursuit of their dreams. Financial markets are the very path to success and financial freedom. In order to succeed here, we need to know the trading rules, and technical analysis is the first thing that comes to mind. The formation, reasons, and signals of Japanese candlestick patterns in technical analysis are our first step towards understanding. One of these patterns is the "Falling Window" candlestick pattern that we will talk about today.
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| Falling Window Candlesticks |
- Topic: Falling Window
- Type: bearish
- Trend direction: continuation
- Opposite pattern: Rising Window
What is the "Falling window" candlestick
pattern?
The Falling Window is a bearish candlestick pattern
consisting of two candles. It appears within strong downtrends, and when seen
on a price chart, it generally signals a continuation of the downward trend.
This pattern suggests that a bear market could persist and that the downward
trend is likely to continue. The falling window pattern can indicate a sudden
weakness or selling tension in the market, and increases the probability of
the downtrend continuing in a bear market.
The Structure of the Falling Window candlestick pattern
The Falling Window candlestick pattern consists of two
consecutive candles, with a downward gap between them. This pattern occurs when
bears are dominant in the market over bulls. Dominant bears can continuously
push prices downward. The most noticeable element in the pattern structure is
the gap between two candles. This gap indicates increased selling intensity and
a rapid drop in price below the closing price of the previous candle. Here is
the structure of the "Falling Window" candlestick pattern:
Two bearish candles: The main candles that form the pattern
are two consecutive red candles. Both candles usually have long bodies and
are downward.
Downward gap: There is a gap between the two bearish
candles. This gap is between the lowest level of the first red candle and the
highest level of the second red candle. This downward gap indicates a sudden
drop, often occurring due to news or market sensitivity. This gap creates the
concept of a "window," which gives the pattern its name.
The Falling Window pattern is usually defined by the price
opening at a level lower than the previous level and the presence of a gap
between them. This structure indicates that the price came with a sudden drop
and suggests that the bearish trend may continue.
Trading with Falling Window candlestick
pattern
The Falling Window candlestick pattern mainly occurs when
the downward trend strengthens. Sellers in the market gain an advantageous
position, and the increased risk of price decline can trigger selling. When an
asset is already in a downtrend and the Falling Window pattern forms, it is
considered a technical analysis rule that suggests the asset's price could
further decrease, indicating a continuation of the downward trend. However,
when trading in financial markets like Forex, it's important to avoid rushing
and instead approach with patience, considering other technical and fundamental
factors.
Sell (Short): Selling can be done below the closing price of
the second bearish candle.
Stop Loss: The stop loss order can be placed above the high
of the first bearish candlestick or above the gap.
Take Profit: Targets are generally determined based on the
asset's price movement and the risk-reward ratio of the trading strategy.
Below, we provide a detailed trading example that illustrates how the Falling Window pattern manifested in the American Airlines Group stock price. This example demonstrates how the pattern signaled the continuation of a downtrend, highlighting the impact of the pattern on price movement and trading strategies.
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| Falling Window reflects downtrend continuation in AAL stock. |
Kindly be aware that: Remember, the reliability of candlestick patterns is limited, and they are not sufficient on their own. None of the candlestick patterns guarantee definite success. The Falling Window pattern is not a standalone trading signal and should be used in conjunction with other technical indicators and formations. Always pay attention to risk management. May your trades be profitable!