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Separating Lines Candlestick Pattern

What Exactly is the Separating Lines Candlestick Pattern?

When a bullish candle pattern is followed by a bearish candle pattern that opens at the start of the previous bar in a downtrend, or when a bullish bar follows a bearish candle that opens under the open of the earlier candle in an uptrend, the Separating Lines candlestick pattern arises.

This is a two-candle continuation pattern that can be bearish or bullish depending on the direction of the previous trend. When lines move in opposite directions, this happens.

Separating Lines Candlesticks pattern is further categorized into two patterns based on the trend’s direction.

  • Bullish separating lines
  • Bearish separating lines

Bullish Separating Lines Candlesticks Pattern

Bullish Separating Lines Candlesticks Pattern

 

The bullish separating lines pattern is made up of two candles, the first of which is bearish and the second of which is bullish.

The first candle is a bearish candle. The second candle either opens above or below the prior candle’s body. The second candle finishes higher than it began.

The bullish separating lines candlestick is a continuation pattern of a bullish trend. It indicates that the bullish trend will continue, and it usually appears within an uptrend.

It is not advisable to trade the bullish separating lines pattern at the peak of a trend or when the market is overbought.

Information Table: Separating Lines That are Bullish

Structures Description
Count of Candlestick Two
Prediction The bullish trend is expected to continue.
Prior Trend Bullish trend
Counter Pattern Bearish Separating Lines

Bearish Separating Line Candlesticks Pattern

Two candles form a bearish separating line. The first is bullish, while the second is bearish and ends with a gap down. The first candle is positive and forms a negative trend. The second candle is negative and opens below the prior candles open.

Bearish Separating Line Candlesticks Pattern

 

The bearish separating lines candlestick is a continuation pattern of a bearish trend. It usually occurs amid a downtrend and signals that the bearish trend will continue. You should not trade at the support or demand zone because this pattern emerges within the trend.

Structure Description
Count of Candlesticks Two
Prediction The bearish trend is expected to continue.
Prior Trend Bearish Trend
Counter Pattern Bullish separating lines

Call to action

Understanding the Candlestick Pattern with Separating Lines

The construction of higher highs or lower lows is the first fact of trend continuation since it is the most fundamental technique to determine the direction of the trend in the market.

When a bullish candlestick opens at the closing price of a bearish candlestick, as is the case with bullish separating lines, it signifies that the buyers have overcome a substantial obstacle. It is because a candlestick’s closing price serves as a main important level. Therefore, the opening and closing of a bullish candlestick above that important level indicate that buyers have a greater probability of driving up the price. Additionally, it symbolizes the development of higher highs and lower lows.

How Do you Trade the Separation of Lines Pattern?

A black or red body forms during an upsurge. This causes some fear for the bulls, but the next day, prices gap back up to the previous days open. When this occurs, the bulls get convinced that the trend will continue to move higher, and they re-enter the market. The trend of renewed confidence continues.

Candlestick signals identify the flow of money into and out of stocks. The ability to detect and comprehend the trader psychology that generates candlestick indications provides a significant edge. It allows a trader to participate in stock investments that have a high possibility of advancing in the proper direction.

When traders understand how to use candlestick signals correctly, they will have the information to improve their trading tactics for the trading entity they want to trade with. You don’t have to rely on prefabricated systems that sometimes work and sometimes don’t, and you don’t have to follow stock recommendations blindly.

Trade the Separation of Lines Pattern

 

Rules are created to improve the risk-reward and winning percentage of a trading strategy. For example, if two technical patterns imply the continuance of a bearish trend, the likelihood of continuation rises.

A Trading Technique using Separating Bearish Lines

This trading method is a bearish separating line and exponential moving average pattern as a result of the convergence.

Bearish Volume and Separating Lines Condition

You can acquire new information about the market’s conviction by integrating volume into your trade. You just learn the transaction volume that supported a move, which will be very helpful in figuring out which candles are the most important! A candle is viewed as having great significance if it is made with a lot of volume, and vice versa.

The second bearish candle must then have formed with a larger volume than the bullish candle that came before it.

The guidelines for going short therefore become:

  1. There are dividing bearish lines.
  2. The second candle’s volume is greater than the first candle’s volume.

To close the transaction, we need to wait for five bars.

five bars

 

Separating Lines and Range Conditions That are Bearish

Similar to volume, a larger range denotes a candle’s greater significance, whilst a lower range denotes a candle’s lesser significance.

By applying this reasoning, it could appear that the best filter would demand that the second candle have a wider range than the first. However, it could be preferable if the first candle has the largest range because the bearish separating lines are composed of a large gap. The next gap would therefore require more bearish emotion, strengthening the pattern.

To enter a long trade, this approach will use the following circumstances:

A bearish dividing line is present.

The first candle’s range is wider than the second candle.

Once more, we’ll employ a straightforward time exit to close the trade after five bars.

Lines and Range Conditions

 

Many traders may find candlestick patterns like the bearish separating lines to be quite helpful, but it’s crucial to never assume something will work without first having it back tested.

A Trading Technique Using Separating Bullish Lines

This trading method is a bullish separating line, and it is further divided into parts which are mentioned below.

Condition of Bullish Separating Lines with Volume

Volume can occasionally be quite beneficial to a trading strategy since it allows us to see when the major players are entering or leaving the market.

A candle’s significance is typically increased if it is generated with a large volume. As a result, we’ll demand that the volume of the second bullish bar be at least twice that of the first bearish bar.

Bullish Separating Lines and Range Condition

If a candle has a wide range, it simply suggests that market forces were successful in moving the market far, which indicates strength.

Given that it has a gap that is greater than or equal to the range of the first candle, the bullish separating lines are a really unique pattern. In order to span the entire length of the first candle, bulls must exert considerable market pressure. Therefore, if the initial bearish candle has a wide range, the pattern actually becomes bullish!

However, if the second candle is also large, that is also bullish. Due to this, both candles will need to be larger than the true range on average.

A bullish dividing line is present.

The ranges of both candles should be greater than the typical real range.

After 5 bars, we close the transaction.

Bullish Separating Lines

 

Conclusions

This candlestick pattern will usually appear on stock and index charts. Because of the extreme volatility, there is less chance of a gap within the candlesticks in forex. Remember not to confuse this gap with the gap that formed over the weekend in the forex charts.

It is advisable to trade candlestick patterns only in conjunction with other technical tools such as moving averages, important levels, supply and demand zones, and so on.

Saman Ali

Saman Ali is a Professional Financial Researcher, Quantitative Analyst and an Experienced Writer for more than 5 years. Saman’s main passion is for Cryptocurrencies, Stocks, Forex and Blockchain Technology. She holds an MBA in Finance and has specializations in producing high quality content about Cryptocurrencies, FX, Broker’s review, Price Predictions, Fundamental & Technical Analysis, and Educational Content.

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