Hikkake Pattern Indicator

What is the Hikkake Pattern Indicator?

The Hikkake Pattern Indicator is a technical analysis tool used in the Forex market. It is designed to identify potential reversals in price movements by analyzing the behavior of candlesticks. The indicator was developed by Daniel L. Chesler, a former trader at Merrill Lynch, and its name comes from the Japanese word “hikkake,” which means “to trick.” The Hikkake Pattern Indicator is based on the idea that markets can be unpredictable and that traders must be able to recognize patterns that indicate a change in direction.

Hikkake Pattern Indicator Strategy

Here’s a simple trading strategy using the Hikkake Pattern Indicator for forex:

  • Identify the Hikkake Pattern: The first step is to identify the Hikkake Pattern on your chart. This pattern is formed by a sequence of three candlesticks, with the second candlestick having a higher high and a lower low than the first and third candlesticks. The third candlestick should also close within the range of the first candlestick.
  • Wait for Confirmation: Once you’ve identified the Hikkake Pattern, wait for confirmation of a trend reversal. This can be done by looking for a break in the trend line.
  • Enter the Trade: Once you have confirmation of a trend reversal, enter the trade in the direction of the new trend. This can be done by placing a buy order if the trend has reversed upwards or a sell order if the trend has reversed downwards.

Buy Signal

Hikkake Pattern Indicator Buy Signal
Hikkake Pattern Indicator Buy Signal

Here are the details for a buy signal using the Hikkake Pattern Indicator:

  • Look for a Hikkake Pattern on your chart. This pattern consists of three candlesticks, with the second candle having a higher high and lower low than the first and third candles.
  • Wait for the third candle to close within the range of the first candle to confirm the pattern.
  • Look for a break above the high of the third candlestick to confirm a bullish trend reversal.
  • Wait for a pullback or a retest of the breakout level to enter the trade.
  • Place a buy order above the high of the third candlestick or above the breakout level.

Sell Signal

Hikkake Pattern Indicator Sell Signal
Hikkake Pattern Indicator Sell Signal

Here are the details for a sell signal using the Hikkake Pattern Indicator:

  • Look for a Hikkake Pattern on your chart. This pattern consists of three candlesticks, with the second candle having a higher high and lower low than the first and third candles.
  • Wait for the third candle to close within the range of the first candle to confirm the pattern.
  • Look for a break below the low of the third candlestick to confirm a bearish trend reversal.
  • Wait for a pullback or a retest of the breakout level to enter the trade.
  • Place a sell order below the low of the third candlestick or below the breakout level.

Hikkake Pattern Indicator Pros & Cons

Pros

  • Clear signal: The Hikkake Pattern Indicator provides a clear signal for identifying potential trend reversals, which can help traders make potential trades.
  • Simple to use: The Hikkake Pattern Indicator is easy to understand and use, making it suitable for both novice and experienced traders.
  • Works on any timeframe: The indicator can be used on any timeframe, from minutes to months.
  • Risk management: The indicator helps traders manage their risk by providing clear entry and exit points for trades.

Cons

  • False signals: Like any trading indicator, the Hikkake Pattern Indicator can provide false signals, which can result in losing trades.
  • Requires experience: While the indicator is simple to use, it requires experience and skill to correctly interpret signals and make returnable trades.
  • Repainting: In some cases, the Hikkake Pattern Indicator can repaint, meaning that the indicator can change its signals after the fact, making it difficult to rely on for accurate trading decisions.
  • Limited application: The Hikkake Pattern Indicator is designed to identify trend reversals and may not be as effective in trending markets, limiting its application in certain market conditions.

Conclusion

In conclusion, the Hikkake Pattern Indicator is a popular technical analysis tool used by forex traders to identify potential trend reversals. It consists of three candlesticks and provides a clear signal for traders to enter or exit trades based on trend reversal patterns. The indicator is easy to use and can be applied to any timeframe. However, it has its limitations, such as the potential for false signals, the need for experience and skill to interpret signals, and the possibility of repainting. By doing so, traders can increase the accuracy of their trading decisions and improve their chances of making potential trades in the forex market.

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