Stalled Candlestick Pattern

The stalled candlestick pattern is a reversal pattern seen in the forex market. It consists of one or two long candles followed by a small candle that doesn’t reach the high of the previous candle. This pattern indicates weak momentum and is frequently a signal of a potential market reversal. Keep reading as we go into the stalled candlestick pattern and the strategies traders might use while trading with it.

What is Stalled Candlestick Pattern

The stalled candlestick pattern is a reversal pattern that may be observed in either a bearish or bullish formation in the Forex market. The pattern is easy to spot because it has one or two longer candles and a small body candle, which can be bullish or bearish.

In a bullish scenario, a long bullish candle shows that there is a lot of pressure to buy, while a short bullish candle shows that the bullish trend has ended. It probably means that the bulls are
losing ground and the bears are gaining control. This also holds for a bearish trend.

The pattern is named after the fact that the smaller candle’s body is often contained inside the larger candle’s body; this smaller candle is also called a “doji” since it has no or very little body.

Stalled Candlestick Strategy

A strategy for trading the stalled candlestick pattern is to wait for confirmation of a trend reversal before placing a trade. This involves waiting for the next candlestick to close in the opposite direction of the stalled candlestick. For example, if the stalled candlestick is bearish, you should wait for the next candlestick to close bullish before entering a long position.

Stop-loss orders are another strategy used to minimize potential losses. For a long position, put it below the stalled candlestick’s low, and for a short position, put it above the stalled candlestick’s high.

Further technical indicators, such as support and resistance levels, and patterns such as trend lines and moving averages, may be used to validate the trend reversal and identify possible entry and exit points. Finally, keep in mind that the stalled candlestick pattern isn’t a guaranteed indicator of a trend reversal and should be used in combination with other analysis methods.

Buy Signal

Stalled Candlestick Pattern
Stalled Candlestick Pattern Buy Signal
  • Wait for one or two long bullish candles, followed by a small bearish candle (or doji), after an extended downtrend.
  • The next candlestick should be bullish, hence validating the buy signal.
  • Traders may further check for other bullish indicators, such as moving averages or relative strength index, to validate the signal.
  • Once the stalled candlestick pattern is confirmed on the charts, traders may place a buy order.
  • Stop-loss orders should be placed at a maximum of 30 pips or in accordance with the trader’s money management technique.

Sell Signal

Stalled Candlestick Pattern
Stalled Candlestick Pattern Sell Signal
  • Wait for one or two long bearish candles to be followed by a small bullish candle (or doji) after an extended uptrend.
  • The next candlestick should be bearish, hence validating the sell signal.
  • To verify the signal, traders may also search for other bullish indicators, such as moving averages or relative strength index.
  • Once the chart confirms the stalled candlestick pattern, traders may enter a sell position.
  • Stop-loss orders should be placed at a maximum of 30 pips or in accordance with the trader’s money management technique.

Stalled Candlestick Pattern Pros & Cons

Pros

  • The pattern is simple to identify and may be combined with additional technical indicators to validate the signal.
  • The pattern can be used in both bullish and bearish markets, allowing traders to place trades in both directions.

Cons

  • The pattern is not a reliable indicator.
  • The pattern may not be a strong enough indicator of a significant trend reversal, and traders should be cautious that the reversal may be temporary.
  • The pattern may be a false signal, therefore traders should watch for the formation of other patterns alongside the Stalled Candlestick pattern to validate the signal.

Conclusion

In conclusion, the stalled candlestick pattern is a great reversal signal that can tell when a trend is about to change. It has a long lower shadow and a small true body that is either bullish or bearish. Traders should keep in mind that a single stalled candlestick pattern is not a dependable indicator and instead use it in combination with other technical analysis tools.

Free Forex Robot