A thrusting pattern is a kind of price chart pattern that technical analysts use in the forex markets. This pattern occurs when a long red candle is accompanied by a green candle. While the green candle closes higher than the red candle’s close, it does not close higher than the midpoint of the red candle’s true body.
In general, thrusting patterns are regarded as bearish continuation patterns. However, they may also indicate a bullish reversal. Thus, the thrusting pattern is most effective when combined with various trading signals. In this post, we will analyze the thrusting candlestick pattern as well as a potential trading strategy that traders may use with this pattern.
What is the Thrusting Candlestick Pattern?
The thrusting candlestick pattern is recognized as a long red candle and a short green candle that gaps below the red candle. There is a strong bullish move as the green candle opens below the close of the red candle and closes above the red candle’s midway. However, the inability of the green candle to rise beyond the black candle’s midpoint is a sign of a lack of buying power among bulls, indicating the bearish trend will continue. As a result, others interpret a thrusting pattern as a warning that the downtrend will continue and that bulls will abandon their effort at a rally.
However, there is contradicting evidence as well. The thrusting pattern is generally followed by a bullish reversal, according to statistical research. Whether the price rises or falls in accordance with the pattern is simply a gamble. As a result of the pattern’s contradictory performance, traders and analysts employing it should be prepared for a breakout (a move above the pattern’s high or low) in either direction or should wait for confirmation of the breakout direction from other types of technical analysis before opening any trade.
Within a long-term uptrend, a pullback in price that creates a thrusting pattern along a rising trendline could indicate that the pullback is over and the uptrend is continuing if the pattern is broken to the upside.
Thrusting Candlestick Pattern Strategy
The thrusting candlestick pattern may be identified and traded by looking for instances in which it occurs during an uptrend or downtrend, and then using it as a signal to open or close a trade in the direction of the trend. Traders will look for a price break above the first candle’s high to indicate a possible long trade, or a dip below the second candle’s low to suggest a potential short trade since the price can break higher or lower following the pattern.
There are several potential points for placing a stop loss. A stop loss may be set below the low of the pattern or the low of the most recent breakout candle if an upside breakout occurs. A stop-loss order could be set above the pattern’s high or above the most current breakout candle in case of a downside breakout. As it is, the pattern does not indicate where to close a trade. The trader is responsible for deciding when and how to close the trade.
Buy Signal
- Wait for the complete formation of the Thrusting Candlestick Pattern on the chart of an uptrend or range-bound market.
- Confirm that the third candle is bullish and closes above the first.
- You may enter a buy position at the close of this bullish candlestick.
- You may set your take-profit order just before the next level of resistance or according to your own money management strategy.
- Stop-loss orders may be set below the pattern’s low or the low of the most recent breakout candle.
Sell Signal
- Wait for the complete formation of the Thrusting Candlestick Pattern on the chart before entering a down-trending market.
- Confirm that the third candle is bearish and closes below the first candle.
- You may open a sell order at the end of this bearish candlestick.
- You may set your take-profit order just before the next support level or in line with your personal money management approach.
- Stop-loss orders may be set above the pattern’s high or the most recent breakout candle.
Thrusting Candlestick Pattern Pros & Cons
Pros
- It can be a powerful bullish or bearish reversal signal, signaling a change in trend direction.
- It provides possibilities for long and short positions in both uptrends and downtrends.
- It can be combined with other technical indicators and chart patterns to validate the signal.
Cons
- The pattern is an unreliable indicator of future price direction. There is a 50/50 chance that the price will increase or decrease.
- Following the trend, there will not necessarily be a significant price movement. The price may go in one direction for several periods, or it may rapidly reverse course.
- It is a rather unusual pattern, so it may not regularly arise in a trading system.
Conclusion
In conclusion, the thrusting candlestick pattern is a possible trend reversal indication and may act as either a bullish reversal pattern or a bearish continuation pattern. This pattern may be a powerful signal of a trend reversal in the market; therefore, traders should keep an eye out for it while analyzing charts. You should always use it in combination with other types of technical analysis and indicators, as well as a solid grasp of market fundamentals, to help you make more educated trades.
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