Cradle Candlestick Pattern

To fully understand the Cradle pattern, a trader should have a prior and comprehensive knowledge of the Japanese candlesticks and their traits. The Cradle pattern is a signal of a trend reversal, typically seen during a downtrend. It is crucial to confirm the reversal with subsequent candles after the pattern forms. The Cradle pattern is rare but can be a strong trading signal when used correctly.

What is the starting point of the pattern?

The pattern commences with a prolonged and dark candle. It is frequently observed in a downward trend as a result of investors selling due to the uncertainty of the trend. There might also be a phase of uncertain prices, represented by the presence of Doji, Spinning Tops, Hammer, and Inverted Hammer candles, as prices remain in a delicate equilibrium. The pattern concludes with a powerful upward movement, signified by a prolonged and light candle, indicating the end of the downward trend.

The Cradle Pattern is a variation of the series of Doji at the top or bottom, which is named as such due to its resemblance to a “cradle.” This makes it easy to recognize as a reversal pattern. It begins with the same visual indication found in most top or bottom area. a large Bearish candle at the top/bottom of a downtrend or an uptrend, which shows significant buying or selling in the market structure.

The following day usually displays a candlestick signal such as a Doji, Spinning pattern, Harami, Hammer, or Inverted Hammer, indicating that the selling has stopped or the buying has begins. At this stage, traders should look for a Confirmation buy and sell Candlestick Signal. Keep in mind that indecisive trading signals may occur for several days before the buy/sell signal appears.

The Cradle Pattern reveals investor sentiment. If traders view the large dark candle as the headboard, the Bullish candle becomes the footboard. The Cradle Pattern formation is now suspended at the bottom, indicating that the trend should move up from this level.

What is the Cradle Candlestick Pattern?

The Cradle Candlestick pattern is a reversal indicator used to pinpoint potential buying and selling opportunities in the market. It is a strong tool that assists traders in making knowledgeable decisions about when to initiate or close a trade.

Cradle Candlestick Pattern Strategy

Bullish Cradle Candlestick Pattern

  • The pattern is formed when the market is in a bearish trend and the second candle is followed by a bullish candle.
  • The bullish candle that follows the bearish candle is a signal to buy.
  • The third candle confirms the trend reversal.
Bullish Cradle Candlestick Pattern
Bullish Cradle Candlestick Pattern

Bearish Cradle Candlestick Pattern

  • The formation of the pattern occurs when the market is in an upward trend and is preceded by a bearish candle after a bullish candle.
  • The bearish candle that follows the bullish candle is a signal to sell.
  • The third candle confirms the trend reversal.
Bearish Cradle Candlestick Pattern
Bearish Cradle Candlestick Pattern

Cradle Candlestick Pattern Pros & Cons

Pros

  • The Cradle Candlestick pattern is a powerful tool that helps traders to make informed decisions about when to enter or exit a trade.
  • The Cradle pattern can be quickly recognized as a reversal pattern.
  • It can be used to identify both short-term and long-term trading opportunities.

Cons

  • The Cradle Candlestick pattern can be misleading if used alone without other indicators.
  • It can be difficult to identify the pattern in the early stages of the trend reversal.
  • The pattern can be affected by market volatility.

Conclusion

The Cradle pattern reveals the emotions of traders. If traders view the large dark candle as the headboard, the bullish candle becomes the footboard. The formation of the Cradle pattern suggests that the trend will rise from this point. Stephen Bigalow features this pattern in his second book, “High-Profit Candlestick Patterns: Turning Investor Sentiment into High Profits” as a feature.