The Abandoned Baby is a reversal candlestick pattern that shows a shift in momentum from the bullish to bearish and vice versa. The pattern consists of three candles. The abandoned baby pattern is a multiple candlestick reversal patterns. This candlestick pattern is similar to the morning and evening star candlestick patterns. The main difference between this pattern and morning star and evening star is that real bodies and shadows cannot overlap.
What is the Abandoned Baby Candlestick Pattern?
The first candle of the Abandoned Baby determines the direction of the trend.
The next candle is the Doji that gaps the first candle in the direction of the trend.
The last candle appears in the opposite direction of the first candle, and gaps in the other direction of the second candle.
The bodies and wicks of the candles don’t overlap with each other.
The pattern has two variations; Bullish Abandoned Baby and Bearish Abandoned Baby.
Bullish Abandoned Baby
The Bullish Abandoned Baby is a three-candle pattern that appears in a downtrend. The first candle of the pattern is a down candle, followed by a gapped Doji, and a gapped bullish candle. The pattern signals the initiation of a potential uptrend.
Bearish Abandoned Baby
The Bearish Abandoned baby consists of three candles and emerges in an uptrend. Its first candle is an up candle, followed by a gapped Doji, and a gapped bearish candle. The pattern signifies the inception of a possible downtrend.
Although there is a slight variation in the bullish and bearish pattern, yet what’s important is the movement of the price.
Traders identify both bullish and bearish Abandoned Baby from three specifications; first, a strong trend, second, proper arrangement of the pattern, and third, the gaps between the candles.
Both the bullish and the bearish Abandoned Baby resemble the Morning and the Evening Star Candlestick Patterns. The difference between the patterns occurs due to the presence of a Doji candlestick. Morning and Evening Stars don’t require the second candle to be a Doji.
Besides this, the Abandoned Baby looks similar to the Island Reversal pattern, but with a single candle.
Due to the structure of the Abandoned Baby, it infrequently surfaces on the charts.
How to use the Abandoned Baby Candlestick Pattern?
One of the benefits of Abandoned Baby is it can give clear entry and exit signals. Traders can apply Bullish Abandoned Baby for going long and Bearish Abandoned Baby for going short.
For the bullish pattern, traders would usually enter above the third candle. If the price continues to move higher, traders can use it as a buying opportunity. Traders could place a stop-loss below the lower wick of the Doji (second) candle. The conservative trader may place a stop-loss below the third candle.
For the bearish pattern, traders enter below the third candle. If the price continues to move downwards, it’s a sell signal. A stop-loss is placed above the upper wick of the Doji candle. However, a conservative trader may place a stop-loss above the third candle.
Although the Abandoned Baby defines a price reversal, it doesn’t tell about the profit-targets. Therefore, other indicators like Fibonacci Retracements could be used.
Abandoned Baby Candlestick Pattern trading strategy
Due to the nature of the pattern, the Abandoned Baby scarcely appears on the charts. However, when it surfaces, it can be used as part of an overall forex trading strategy as an additional filter.
You can spot these candlestick patterns on long and short term timeframes. They can appear on forex currency pairs, stocks, indices, cryptocurrencies, commodities, metals, energies, gold, silver and more.
The doji candle needs to gap from the two candles which sandwich the pattern. There should be no overlaps between the middle candle and the two candles surrounding it. The abandoned baby is one of the rarest candle patterns. A stop loss order should always be used when trading the abandoned baby candlestick pattern.
Abandoned Baby Candlestick Pattern buy strategy
- Look for the pattern in a downtrend.
- Wait for the price bar to go bullish before entering.
- Enter after the formation of the pattern.
- Place a stop-loss near the low of the second candle.
- Exit the trade on high.
Abandoned Baby Candlestick Pattern sell strategy
- Locate the pattern in an uptrend.
- Wait for the price bar to go bearish before entering.
- Enter after the formation of the pattern.
- Place a stop-loss near the recent high of the Doji.
- Exit the trade on low.
Abandoned Baby Candlestick Pattern conclusion
The abandoned baby is a reversal candlestick pattern that happens at the end of a bullish and bearish trend. Unlike other candlestick patterns that we have looked like the doji and engulfing, it is not popular. But when it happens, it tends to be relatively accurate. It is therefore useful to know at least how this pattern looks and how to take advantage of it thanks to some simple tips.
The Abandoned Baby Candlestick Pattern can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy. The Abandoned Baby Candlestick Pattern can help to spot a trend reversals as part of a forex reversal strategy. But, identifying the pattern on a chart is often challenging.
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