This is a candlestick pattern that offers great confidence every time it appears. This is a sure warning candlestick pattern that the market will recover in the future. That’s how traders talk about the Piercing candlestick pattern in Forex.
In this article, howtotradeblog will introduce you to this special bullish candlestick pattern. Along with that is a guide on how to use it in Forex so that it is most effective.
What is a Piercing candlestick pattern?
In Forex, Piercing Pattern (also known as Rising Sun) is a special Japanese candlestick pattern consisting of 2 candles. The first candle is a strong bearish candlestick. The second candle is a green candle with the opening price lower than the first candle closing price. Also, the length of the second green candle should be at least ½ of the body of the first candle.
This is a strong bullish reversal pattern in the market. They usually appear at the end of a downtrend and serve as a warning signal for a strong market recovery in the future.
Market sentiment and the significance of the pattern
The whole market sentiment plays out in this pattern as follows: Initially, a red candle with a long body appears, showing that the market’s downside is still in progress. The sellers are still dominating.
However, when the next trading session opens, a gap down appears showing a breakout of support left by the previous session (closing price of the 1st candle). However, instead of continuing to decline, it suddenly turns up, creating a green candle that closes more than half of the previous candle. The creation of this pattern shows the price breakout and warns that the sellers have used up their full strength, creating confidence for buyers to push prices up again.
When combining 2 candles in this pattern, you will receive a Hammer candlestick pattern. This is a familiar strong bullish signal. The higher the price of the second candle closes compared to the first candle, the stronger the bullish signal will be.
On price charts, the Piercing pattern usually appears at the bottom of the market. They give traders a strong belief that the price will rise again.
How to trade Forex effectively with a Piercing pattern
Here, I will show you how to open a Forex order effectively when this pattern appears on the price chart. This is just a reference trading strategy using the Piercing pattern. For high precision trades, you need to combine it with other trading signals.
This pattern is a strong signal that the price will rebound. So you should open BUY orders with it only. You can open orders with the stop-loss and take-profit as follows:
+ Entry Point: As soon as the price completes the Piercing candlestick pattern.
+ Stop-Loss: At the wick of the second green candlestick in the Piercing candlestick pattern
+ Take-Profit: when the price touches old resistance levels that have been formed in the past.
All the knowledge that we have compiled is just theory. In order to be able to trade like a successful trader and bring real profits, you need to practice hard to sharpen your ability to trade in real terms. So get familiar with the Piercing pattern today on a Demo account to verify it first.
The post How To Use The Piercing Pattern Effectively In Forex appeared first on How To Trade Blog.