On the price chart, candlestick patterns are frequently seen. Traders utilize these patterns in order to identify the best entry points for transactions. Specifically, the Hikkake Pattern is the topic of today’s article. The word hook comes from Japanese and means “to entrap, to capture”.
A description of the Hikkake pattern
In candlestick patterns, hikkake patterns serve to identify short-term downward and upward movements of the price. There is a difference between a bearish and a bullish pattern according to the direction. Bullish patterns are more frequent.
The Hikkake pattern was invented by Daniel L. Chesler, CMT. The first description of it appeared in 2003. Candles are placed in different directions to form the pattern. Initially, they move in one direction, but then turn around, indicating that the market’s direction has changed.
Within the Hikkake pattern are two candles known as inside-day candles, or Harami candles (A). These candles are smaller. They are both engulfed by the first candle.
(B) The closing of the next candle is higher or lower than the closing of the previous candle. Whether it is a bullish pattern or a bearish pattern will determine the direction of the pattern.
Depending on the type of pattern, the following candles appear above or below the third candle (C).
In the pattern, the closing of the last candle is below the low of the second candle or above its high (D).
In a completed pattern, the last candle in the pattern indicates the direction the price will move. Candlestick charts can be used to identify Hikkake patterns, but bar charts are also useful.
Bullish Hikkake pattern
In the price chart, the bullish pattern is more frequent. As can be seen in the above image, there are four crucial points: A, B, C, and D. As can be seen in the above image, the first bar of the pattern engulfs candle A. As can be seen in the above image, the B closes lower than the A. Candle C usually develops lower compared to the third candle’s highest price. Finally, D closes higher than A.
Bearish Hikkake pattern
It looks somewhat opposite to the bullish Hikkake pattern. The first candle is still engulfing the A. But the closing price of the B was higher than that of the A. In general, the price of C candles appears higher than that of the third candle, and the last one closes below candle A.
On IQ Option, you can trade the Hikkake pattern
An example of a Hikkake chart is presented below. It is a bullish chart with all four characteristics. There is a short-term drop in prices indicated by the first candles, and a breakout is displayed by the third candles. Upon completion of this pattern, it is likely you will see an upward trend, and a buy position should be opened.
On the GBPUSD 5m chart, you can see a bullish Hikkake pattern
On the following screenshot is the Hikkake pattern, which shows a bearish signal. You should enter the trade in the direction of the last candle, suggesting a sell position.
The GBPUSD 5m chart shows a bearish Hikkake pattern
Hikkake patterns have to be identified on the chart in order to be traded. Chart timeframes of five minutes and above provide the best results with candlestick patterns. IQ Option has a free demo account that you can use to practice. Neither your money nor your time is at risk, but you do have time to learn the candlestick pattern. We would love to hear what you have to say about this pattern.