Dark Cloud Cover candlestick pattern is one of the most reliable bearish reversal signals in Forex. So, what is the Dark Cloud Cover? What characteristics and meaning does it have? Especially, how do you open Forex orders with high accuracy when this candlestick pattern appears? All will be answered by me in this article.
What is the Dark Cloud Cover candlestick pattern?
Dark Cloud Cover is one of the popular reversal Forex candlestick patterns in Forex. It is seen as a reliable signal that the price will plummet in the future. When trading Forex, every trader must keep an eye on the Dark Cloud Cover every time it appears at the end of an uptrend.
This pattern has 2 characteristics as follows:
– First candlestick: is a strong green bullish candle with a long body.
– Next candlestick: is a candlestick with an opening price higher than the closing price of the first candle (a gap up appears). This candle is a strong bearish candlestick that closes below the midpoint of the first candle.
Combining the two candlesticks of the Dark Cloud Cover pattern, we will have a Shooting Star candlestick. The price direction of the two patterns is similar. However, Dark Cloud Cover consists of 2 candles (that means a longer candle time period). That is why this candlestick pattern is more accurate than Shooting Star.
Dark Cloud Cover shows that the trend is going up steadily. Suddenly, a strong bullish candle appears, creating a gap up. This shows that the bulls have the upper hand. However, instead of going higher, prices begin to decline sharply and close below the midpoint of the previous candle. Right there, the bears are strong enough to regain control of the market.
The Dark Cloud Cover pattern usually appears at the end of uptrends. It is a strong signal that the price will drop sharply. Many successful traders use this pattern as a SELL confirmation signal to earn the first bearish waves.
The most optimal way to trade Forex with the Dark Cloud Cover pattern
Below, I will show you how to trade with the Dark Cloud Cover pattern. As this is a bearish signal when this pattern appears you can only open SELL orders.
Open a SELL order as follows:
+ Entry Point: As soon as the price completes the pattern.
+ Stop-Loss: At the highest price level before the price turns down and creates the Dark Cloud Cover pattern.
+ Take-Profit: When the price touches old support levels that have been formed in the past.
Above is the article introducing you to the Dark Cloud Cover candlestick pattern. This is a reliable price signal that you need to know to be able to judge and trade with the market more accurately.