Falling Window Candlestick Pattern: A Trader’s Guide
A Candlestick chart represents the price fluctuations that summarise valuable information for traders in a single bar. It displays the daily high and low prices and the opening and closing prices for the given period. Moreover, financial experts and traders use this tool in technical analysis to foresee potential movement in an asset’s price.
Furthermore, candlesticks form different patterns with several explanations because they are colorful and easier to read. One such pattern is The Falling Window. It is a technical term describing a price gap in a downward price trend and functions as a bearish continuation pattern.
Please continue reading this article to learn more about the Falling Window.
Falling Window Candlestick Pattern
The falling window is a two-candle pattern that appears during a downtrend. It is a bearish continuation pattern, often known as a gap-down. It occurs when the difference between yesterday’s low and today’s high forms a gap in the daily price. This price difference is the most significant feature of the pattern.
The down gap is the distance between the high and low of the previous and most recent candlesticks. It happens due to the market’s massive amount of selling orders. Once a trend starts, it tends to move in the direction signaled by the overall market performance.
Moreover, this continuation pattern is frequent on shorter time scale charts but not longer time scale charts.
Identifying falling window pattern
To identify the falling window chart pattern, you must find two bearish candlesticks with a gap between the first and second candles. Some crucial factors to note while finding the pattern are:
- The pattern only appears when prices are falling.
- You need to find two bearish candlesticks and a gap between them.
- The second candle must be lower than the first, with a downward gap between them. Remember that the gap should not be too large.
- Bearish candlesticks must have big bodies since it indicates strong selling pressure.
|Number of Candlesticks||2|
|Prediction||Continued bearish trend|
|Prior Trend||Bearish trend|
|Relevant Pattern||Rising window candlestick|
Trading lessons from the Falling Window Candlestick Pattern
It is a Bearish trend continuation pattern that indicates how aggressive the sellers are in the market. In this situation, the movement shows a gap between the low and the high of the candles. The price decline reflects the dominance of the bears.
Moreover, when several selling orders are executed simultaneously, the price will move dramatically, and a gap will appear on the chart. A large gap shows a considerable price decline. Therefore, when a falling window forms on the price chart, it indicates that the asset or security will continue to decline.
Once two bearish candlesticks and a down gap indicate that sellers are in charge of the market, you must recognize that the market will drop lower because of the intense pressure from sellers. However, it is always wise to wait for confirmation, even if this signal usually acts as the value of the asset will continue to decline.
The gap indicates a substantial decline, after which the bulls tried to push the price back up. However, if they fail, the downturn is expected to continue.
Trading the falling window pattern
If the bears take control, they may create a Falling Window candlestick pattern. However, the bears continue to struggle and keep the decline going, as predicted by the indicator.
The down gap in the pattern will act as a resistance zone and limit the price. The price will stay low until the completion of all the selling orders because there are many buying orders in this zone.
The price will either keep declining after the pattern or return toward the gap zone to fulfill some selling orders. As a result, there are two ways to trade this pattern. You have two options: either open sell orders immediately following this candlestick pattern or watch until the price does not move back toward the gap zone.
Additionally, you should avoid trading the falling window pattern if it develops above the support zone since the support zone will stop the trend from continuing. On the other hand, if this pattern develops following the breakout of the support zone, it is a strong sign that the negative trend will continue.
You may use several indicators in combination with window patterns. However, momentum indicators might be the best choice for identifying the strength of the current trend. For example, you may use many technical analysis indicators, such as the RSI, MACD, and Stochastics.
The two bearish candlesticks comprise the falling window candlestick pattern. The down gap is the separation of the peak and bottom two consecutive bars. It develops because of an excess of selling orders in the market. Moreover, this pattern helps anticipate long-term market and trend analysis and conveys information about market bears.