The Rickshaw Man candlestick pattern was first identified by a technical analyst named Steve Nison in his book “Japanese Candlestick Charting Techniques” first published in 1991. It is a reversal pattern that is formed at the top of an uptrend or in the bottom of the downtrend.
This pattern forms when bulls and bears are in a tug of war for control of market prices at different times within the same period, resulting in a long trading range as shown by the long candle in the pattern. It is important to remember that while the Rickshaw Man pattern may resemble the Long-Legged Doji, they are distinct patterns and should be identified separately to accurately interpret market conditions.
What is the Rickshaw Man Candlestick Pattern?
The Rickshaw Man candlestick pattern is often compared to the Long-Legged Doji as both patterns have long wicks, indicating a wide range of prices during the period. However, there is a distinct difference between the two patterns. The Long-Legged Doji has an opening and closing price that are in the middle of the shadows, while the Rickshaw Man pattern has a body that is near the midpoint of the candle.
The pattern is named after the Rickshaw man, a traditional mode of transpotation in Japan, which is thought to resemble the pattern in its shape.
What causes the formation of the Rickshaw Man candlestick pattern?
We previously mentioned that the Rickshaw Man pattern is formed when bears and bulls are in a tug of war for control of the currency pairs price at different times but within the same period. This struggle results in a wide range of prices, creating a long leg of the Rickshaw Man pattern. The opening and closing prices remain relatively similar, forming a Doji shape.
What information does the Rickshaw Man pattern provide to traders?
The behavior of the Rickshaw Man pattern amounts to indecision. It behaves just like the Doji patterns that show the indecision and state of equilibrium in the market. Similar opening and closing prices illustrate the reason behind the inability of traders to take decisions. When expert traders see the Rickshaw Man pattern, they cannot decide their move. They are compelled to sit on the side-line and wait.
Rickshaw Man candlestick pattern Strategy
Bullish Rickshaw Man Candlestick Pattern
- The formation of the Rickshaw Man pattern at the bottom of a downtrend can indicate a potential buy signal.
- To increase the accuracy of the signal, traders should look for confirmation from other bullish indicators such as a break above a key resistance level.
Bearish Rickshaw Man Candlestick Pattern
- The Rickshaw Man pattern sends a sell signal when it is formed at the top of an uptrend.
- Traders should look for the pattern to confirm with other bearish indicators, such as a break below a key support level.
Rickshaw Man Candlestick Pattern Pros & Cons
Pros
- The Rickshaw Man pattern can signal the end of an uptrend and the potential start of a downtrend, providing traders with an early warning of a potential trend reversal.
- When combined with other bearish indicators, the pattern can provide a high probability trade setup.
- The pattern is easy to recognize, making it accessible for traders of all skill levels.
Cons
- The Rickshaw Man pattern is a bearish reversal pattern and should not be used in isolation to make trading decisions.
- The pattern can be difficult to spot in a choppy market or when there is a lack of clear trends.
- As with any technical analysis tool, the Rickshaw Man pattern can produce false signals, which can result in traders entering losing trades.
Conclusion
The Rickshaw Man candlestick pattern is a bearish indication that can signal the end of an uptrend in the Forex market. It is composed of a long white candle, followed by a small candle that gaps above the first one, and a third candle that closes below the midpoint of the first candle. This pattern emerges when both bulls and bears are competing for control of market prices at different times within the same period, leading to a wide range of prices and a long candle in the pattern. Traders should consider this pattern in combination with other forms of market analysis, including support and resistance along with other technical indicators.
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