Blog

It is a firm rule that the bullish candlestick should penetrate and close more than 50% into the previous day’s real body (Nison, 1991, p. 49). The Piercing pattern is known in Japanese as kirikomi, which means ‘cutback’ or ‘switchback’. It is a double candlestick pattern that warns of a possible bullish trend reversal, making it a bottom reversal pattern that appears towards the end of a downtrend. The Piercing is the opposite of the Dark Cloud Cover pattern that appears in an uptrend. As the Piercing pattern is a bullish trend reversal pattern, it must appear in an existing down trend for pattern to be of significance. The Piercing pattern consists of two candlesticks with alternating colors.

If you are looking to trade forex online, you will need an account with a forex broker. If you are looking for some inspiration, please feel free to browse my best forex brokers. I have spent many years testing and reviewing forex brokers. IC Markets are my top choice as I find they have tight spreads, low commission fees, quick execution speeds and excellent customer support. Piercing Candlestick Pattern bullish divergenceThe chart above demonstrates Stochastics showing a bullish divergence. However, the Piercing Pattern can take a few weeks to appear.

It is always best to use multiple indicators in conjunction with one another to make the most informed trading decisions possible. A downward price trend typically precedes the piercing line candle pattern. It indicates that the supply of shares to be sold has reached its maximum, and purchasers have gradually begun to dominate the market, driving up the price of the shares. Each of the three candlesticks in the Three Black Crows pattern should be relatively long bearish candlesticks with little or no lower shadows. Then comes the confirmation candle of green color indicating a confirmed reversal to the bullish direction.

Bearish Piercing Candlestick Pattern: A Trader’s Guide

This is followed by buyers driving prices up to close above 50% of the body of the first candle. But first, let’s run through a short primer on the Piercing Line candlestick pattern. The Piercing Line candlestick trading pattern can help you find reversal entries effectively. Second, on the left, there is a bearish candle that often has a large body and small upper and lower shadows. The length of this candlestick is an important one to note since it needs to be a bit long. Identifying the piercing line pattern is a relatively easy exercise to do.

Scroll through widgets of the different content available for the symbol. The “More Data” widgets are also available from the Links column of the right side of the data table. Switch the View to “Weekly” to see symbols where the pattern will appear on a Weekly chart. Bullish Engulfing Pattern is typically viewed as being more bullish than the Piercing Pattern because it completely reverses the losses of Day 1 and adds new gains. In this guide to understanding the Piercing Line Pattern , we’ll show you what this chart looks like, explain its components, and teach you how to interpret it.

How to identify a piercing line pattern

If either of the https://forexanalytics.info/ line and/or the confirmation candle is accompanied by a relatively higher trading volume, then it improves up the probability of price reversal. The buyers have returned to the market in full swing with high buying demand, and hence they are getting stronger and are able to push up the prices. Therefore, its time to go long – that is, buy the security, or cut the losses if holding a short position.

Please read theRisk Disclosure Statementprior to trading futures products. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Prior to trading options, you should carefully read Characteristics and Risks of Standardized Options.

Bullish Piercing Line

This win of the bulls over bears is considered as a buying signal. Although a Piercing pattern signals a trend reversal, experts do not suggest to rely only on it. It is advised and recommended to use further support signals in conjunction with the Piercing candlestick pattern.

By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. In the GBP/USD daily chart below, both the RSI and MACD confirm the reversal. Still, you should only enter a trade once the candle following the second candle is completed and closes above the previous bullish candle. However, the second candlestick ends on a strong bullish note. This unexpected upwards reversal has excellent potential to shock and trap bearish traders.

Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold The Forex Geek and any authorized distributors of this information harmless in any and all ways. The ideal condition of the piercing line pattern rarely happens.

How to Identify and Use the Piercing Line Pattern in Forex Trading?

However, you should be very cautious while using them for trading, as it can give misleading signals. Like many other trend reversal indicators, the piercing line is a lagging indicator and, therefore, should not be traded in isolation. Instead, you need to find other tools and a trading strategy that may help validate the pattern. And, because chart candlestick patterns tend to repeat themselves time after time, using the appropriate technical indicators could help you increase the chances of success.

• It will draw real-time zones that show you where the price is likely to test in the future.
• A Piercing line candlestick pattern is a two-day bullish candlestick reversal pattern that appears in a downtrend.
• The only difference is that the dark cloud cover happens during a bullish trend.
• The Harami pattern is a 2-bar reversal candlestick patternThe 2nd bar is contained within the 1st one Statistics to…

The second candle’s opening price may still be the closing price of the previous red candle, but for visual purposes, imagine the body of the green candle to include the lower wick. So, in the image above you can see an example of this pattern forming in the charts. Price is moving higher but at the peak of the up move, we see price gapping higher only to reverse and close heavily lower. So, once we have established our bearish piercing line pattern, we can go ahead and enter a sell trade as price breaks below the low of the bearish candle. Once again, we place our stop above the high of the bearish candle this time and we then target at least twice our risk. Another way of establishing confluence, however, is by using technical indicators.

On February 24, 2022, the piercing line pattern formed on the SPX (S&P 500 index). Supporting documentation for any claims, comparison, statistics, or other technical data will be supplied upon request. TD Ameritrade does not make recommendations or determine the suitability of any security, strategy or course of action for you through your use of our trading tools. Any investment decision you make in your self-directed account is solely your responsibility. The technical storage or access that is used exclusively for anonymous statistical purposes.

So, in the image above you can see an example of a bearish piercing line candlestick in an uptrend with the RSI indicator in the sub-panel below. Now, notice what is happening with the RSI indicator at the point this pattern forms. Knowing this pattern helps you understand the underlying order flow action driving the market. Knowing the shift that needs to have occurred in order for this candlestick pattern to form, we are able to establish a buy position built on a solid trading premise. This gives us a much tighter stop and means that if we are looking to keep our trade open, perhaps if using a trailing stop method, we have the potential to secure a much bigger profit.

The best location for piercing candlestick pattern on the price chart

The https://forexhistory.info/ must be seen in conjunction with other indicators that indicate a buy signal. To make a piercing line pattern, the second candle must cover only half of the first candle. Additionally, there was a range breakout, though with a nominal value, which added to the possibility of the price reversal. The piercing line patterns can be spotted regularly on the price charts of various securities – like those of stocks, ETFs and market indexes. Since it appears commonly, one must remain cautious to only enter into a trade when all the necessary requirements are met. Many may end up as false signals, if the signals are not read properly.

https://day-trading.info/ capital is money that can be lost without jeopardizing ones financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.