Keen on timing your exit from the volatile crypto market? Learn how to use evening star patterns to easily identify bearish reversals.

When the crypto market corrects, it typically becomes volatile. Traders need a process to alert them to a potential correction so they can prepare for the volatility. 

, or identifying patterns and trends in market data, is the most common way for crypto traders to develop bearish alerts. Japanese candlestick patterns like the evening star pattern are popular because they can help traders exit a bullish position to lock in profits or generate a new short-sell position.

In this article, we’ll look at the candlestick pattern known as the evening star and see how to trade it.

What Is an Evening Star Candlestick Pattern? 

An evening star candlestick pattern is a three-candle formation used in technical analysis to identify bearish reversals. It consists of a large green candle, a second small-bodied candle, and a third large red candle.

The first candle of the evening star pattern is a large green candle, which suggests the bulls have complete control, pushing the market to a new high.

The next candle continues to run up to higher levels, but the strength behind the move is lacking, so the candle has a smaller body. Ideally, the second candle should gap higher on the open, but since crypto trades continuously — 24 hours a day, 7 days a week — gaps are rare on price charts.

As the market begins to sell off, it produces a large red candle. Often, the gains witnessed by the first candle have evaporated by the time this third candle completes.

These three candles together provide crypto traders with important clues about larger trends for the crypto market. The evening star pattern is generally found at the end of an uptrend, signifying the kickoff to a bearish reversal.

Strengths and Weaknesses of the Evening Star Pattern

The evening star is an effective pattern, making it a favorite of crypto traders as it helps them identify a bearish turn in the market.

One unique aspect of the evening star is that it requires three candles to generate. This makes the formation easier to identify because the candles must take a specific shape.

Additionally, crypto traders like the evening star because it helps them exit a bull market to protect profits. Once the pattern is confirmed, a trader closes all or a portion of their position.

If the trader feels a larger bear trend is going to unfold, they can consider opening a short-sell position with a stop-loss placed above the high of the pattern. Prudent risk management suggests targeting twice the distance from the entry to the stop-loss to generate a 1:2 risk-to-reward ratio.

There is no pattern or indicator that’s foolproof, and the same holds true for the evening star. Just because the pattern appears doesn’t mean that the next price move is going to be a downtrend. There are occasions when the evening star pattern may generate false signals and the market might actually rally.

One way to minimize the number of false signals is to more completely understand the pattern, its shape, and how to trade it — which we’ll explain further below.

How to Easily Identify Evening Star Patterns

The evening star formation is relatively easy to identify because there are three candles working together to tell you a story. The context and backdrop of the story are that the pattern appears after the market has already experienced an uptrend.

The first candle of the pattern appears with a large green (or white) body to extend the current uptrend. Toward the end of strong trends, FOMO can kick in: as the trend accelerates, traders and investors jump on board, afraid of missing out.

As the first candle closes, the second candle continues initially with another slight gain. However, the strength from the previous candle is losing momentum. Many of the traders have joined the trend and the buying power is diminishing.

As a result, the market produces a small-bodied candle as the battle between the buyers and sellers is fairly even. At this point, the candle could be red or green. Either one is okay, as it’s more about the small range of the candle, relative to the previous green bar.

However, it’s critical that this small-bodied candle punches a new high above the first candle. It’s this small-bodied candle that resembles a star in the night sky, giving the formation its name.

Then the third candle appears. Ideally, the third candle begins correcting lower, holding below the high of the second candle. The bullish momentum has completely dissipated from the first two candles, and the sellers take over while the buyers are nowhere to be found. As a result, the market corrects lower, fairly swiftly, erasing nearly all of the gains for the previous two candles.

Once the evening star pattern is identified, it’s fairly easy to use the formation to help you enter into new positions — or help you exit out of an existing trend. The evening star candlestick pattern signals a bearish reversal. Therefore, it can be used to initiate new short-sell positions.

In the daily BTC/USD chart above, we see the price moving up to meet the resistance at a previous swing high. Bitcoin’s price drives the first candle of the evening star pattern higher to meet this resistance level.

Then, the second candle jumps to a new high, but there aren’t enough buyers for the breakout higher to follow through, leaving behind a smaller-bodied candle. As the third candle begins to form, sellers emerge, driving Bitcoin’s price lower and starting the leg of another correction.

Once this pattern is spotted, especially near previous resistance, it signals a bear trend is about to take over. A trader would enter short on the opening of the next candle, while placing a 

To establish the target zone, take the distance between the entry to the stop-loss and multiply it by two. This product will be the distance to your target from your entry.

A couple of days later, Bitcoin corrected lower, reaching the target established by the pattern.

Using the evening star pattern to initiate new short positions isn’t the only way to implement a strategy. For traders who are positioned to the long side, the appearance of an evening star candlestick formation will signal the potential for the uptrend to terminate and reverse, starting a new downtrend.

In late February 2021, a trader positioned to buy the dip would be riding the trend higher. LINK/USDT has increased by about 40% over the past couple of weeks, reaching a new high on March 3.

However, LINK/USDT drives even higher in what appears to be a breakout attempt, forming the first candle of the evening star formation. The second candle consolidates those gains, and the breakout attempt fails to follow through, leaving behind a smaller-bodied candle.

As the third candle forms, LINK/USDT begins to correct even further, nullifying the breakout and sealing it as a false break higher.

Once this pattern is completed, especially near the previous swing high from March 3 (which was acting as resistance), then we have multiple confirmations signaling the kickoff to another correction. At this point, the long trader may decide to close their position to lock in profits.

After the evening star pattern is confirmed, LINK/USDT corrects 23%. The evening star pattern can be effective at helping traders exit long positions, as it signals a bearish reversal may be nearby. 

How Reliable Is the Evening Star Pattern?

By itself, the evening star pattern is a simple formation alerting us to the kickoff of a new correction. There are other technical analysis tools that can help increase the strength of the signal generated by this pattern.

As we’ve previously noted, when the pattern appears near resistance, it generates a stronger signal. 

 is the area on the chart where buyers stop buying and sellers start selling. Levels of resistance can be determined in advance of the evening star pattern’s creation.

As a result, if the evening star formation appears near where the level of resistance has formed, there’s a stronger signal that a bear correction is about to begin.

There are multiple types of resistance which can be generated on a chart. One of the easiest to identify is a horizontal level of resistance. Our previous illustrations using Bitcoin and LINK, above, show how powerful the evening star pattern can be when combined with horizontal resistance.

Another easy form of resistance that can be determined on a chart is a moving average.

Above, we have a 4-hour price chart for Bitcoin with a 50-period simple moving average included. As Bitcoin’s price breaks below the moving average, it briefly rallies to reach the underside.

The evening star candlestick pattern appears right at the moving average, signaling a deeper correction is likely to continue. Bitcoin ends up correcting another 7% over the next day.

Evening Star Pattern vs. Other Trend Reversal Patterns

There are several other bearish reversal patterns which crypto traders follow. Let’s look at how the evening star pattern compares to the head and shoulders, bearish harami, and triple top patterns.

 is a popular reversal pattern followed by crypto traders. There are several differences between the head and shoulders pattern and the evening star.

The evening star pattern develops in three candles, while the head and shoulders may take more candles to develop. Actually, it’s impossible for the head and shoulders pattern to develop in fewer than five candles. The head and shoulders pattern actually forms three smaller tops within the larger pattern, and therefore needs more candles to complete the pattern. 

On the other hand, the evening star pattern will take the shape of one rounded top.

As a result, it’s possible for the evening star to be a portion of the head and shoulders pattern, but the head and shoulders pattern cannot be a part of the evening star.

 is another favorite pattern among crypto traders. However, there are distinct differences between it and the evening star.

The biggest difference between these popular candlestick formations is that the evening star forms in three candles, while the harami forms in two.

Additionally, the high point of the evening star pattern is the second candle. On the other hand, the high point of the harami is in the first candle.

Of course, the second candles of both the evening star and bearish harami are small-bodied candles. However, the evening star’s second candle becomes the high point of the pattern, whereas the second candle of the harami gaps lower to form inside the body of the first candle.

There are a few differences between the evening star and triple top patterns.

 takes place in a sideways range. This means that price is trading sideways as each of the three tops is formed. On the other hand, the evening star is created after an uptrend, not in a sideways range.

Secondly, the triple top requires a minimum of five to six candles to create. The evening star pattern is a small three-candle formation.

Finally, the evening star candlestick pattern could be included within the triple top pattern, but never the other way around. The triple top is the larger pattern, and requires three tops to form, whereas the evening star is just one rounded top.

The three candles of the evening star candlestick pattern make it easy to spot and identify on a market chart. The evening star can help traders exit a bullish market or establish new 

 trading opportunities. Sometimes the evening star can generate false signals, but when combined with other forms of technical analysis, such as horizontal resistance, it can reliably be used to signal a new downtrend. 

Candlestick Patterns Professional Traders Use

 – A curated list of candlestick patterns most frequently used by traders

 – Learn the basics of candlestick patterns

 (Chart basics: trend, neckline, wedges)

Intermediate

Evening Star Pattern How  to Identify a Bearish Reversal in Crypto

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Evening Star Pattern: How to Identify a Bearish Reversal in Crypto

Learn how to trade crypto by identifying trend reversal patterns like tweezer top and bottom candlestick patterns.

Technical analysis is important not just for timing the market, but for helping investors identify market conditions and adapt to the volatility that’s driving today’s market. One of the core 

 components is chart patterns — such as the tweezer top and bottom, which help traders understand market sentiment.

The tweezer top and bottom are combinations of multiple candlesticks which usually appear at the end of an uptrend and downtrend, respectively, signaling a trend reversal. Therefore, investors can buy and sell a crypto asset more precisely by observing how these patterns appear on a chart. The following section includes a complete trading guide on using the tweezer top and bottom candlestick patterns in the cryptocurrency market, including a recommended buying and selling method.

What Are Tweezer Tops and Tweezer Bottoms?

A tweezer top is a combination of bullish and bearish candlesticks at a swing high that indicates a possible bearish pressure. In contrast, a tweezer bottom is a bullish reversal pattern at a swing low, showing possible bullish direction in price.

As the tweezer candlestick has both bullish and bearish formations, crypto investors can use it to identify both entry and exit levels, respectively. The tweezer top pattern appears at the top of a bullish trend, and indicates that bears have become interested in the price. As a result, it provides a sign that bulls should close their positions because there’s a high chance of a trend reversal.

The tweezer top pattern consists of a bullish daily candle followed by a bearish daily candle.

The tweezer top pattern tells a strong market story, as the existing bullish trend forms a solid green candle at a swing high. However, on the next day, the price drops lower instead of moving up, and closes the day with a bearish candle — indicating that bears have found the price to be discounted, and are interested in opening a sell position. 

Now, let’s move to the tweezer bottom pattern, which is the opposite of the tweezer top. It appears at the bottom of a swing low, and indicates a bullish reversal.

The tweezer bottom pattern consists of a bearish daily candle followed by a bullish daily candle.

In cryptocurrency trading, the tweezer bottom pattern is significant because it’s directly related to a trading entry. It appears at a swing low with a strong bearish daily candle, indicating that bears are aggressive in the price. However, the price rebounds higher on the next day, due to buyers’ interest. Therefore, as soon as the second candle closes, investors may consider it a buying opportunity.

Pros and Cons: Using Tweezer Top and Bottom Patterns

Let’s look at the pros of the tweezer top and bottom patterns:

There are also some downsides to using the tweezer top and bottom patterns:

Spotting tweezer top and bottom patterns on a naked chart are easy. Each version of the pattern consists of two long-bodied candlesticks, appearing in parallel but opposite directions. 

Finding a solid trend is the primary requirement for the tweezer trading method. When the market is moving up, prices continue to increase. However, a sudden bearish candlestick similar to the latest bullish candlestick appears and negates the bullish momentum. This is how a tweezer top pattern appears, indicating a bearish pressure.

The above image illustrates the primary way to identify the tweezer top pattern in an uptrend market.

The tweezer bottom pattern is the opposite version of the tweezer top and appears in a downtrending market. Price keeps moving down when suddenly, a bullish candlestick appears which seems similar in size to the previous bearish candle. As a result, a tweezer bottom forms, indicating a possible bullish trend.

The above image illustrates the primary way to identify the tweezer bottom pattern in a downtrending market.

Let’s review the key characteristics of the tweezer top and bottom patterns:

The tweezer candlestick is a reversal pattern, so investors should identify where the trend is heading before making a trade. Uptrending and downtrending markets are easy enough to identify by looking at swing levels. Therefore, investors should know how higher highs and lower lows form in the price chart.

Now, let’s move to the step-by-step approach to make a trade using the tweezer pattern:

 After finding the market trend, investors can spot the point of interest area, which is the supply or demand zone from which the price showed a strong reaction before. Therefore, investors should mark critical levels from where a significant market reversal may occur.

The above image shows how support and resistance levels look at the top and bottom of a trend.

 After finding swing levels, identify the tweezer top from the resistance level, and the tweezer bottom from the support level. Make sure that the trading entry is valid once the second candle has closed.

The above image shows how the tweezer bottom appears at the support level, offering a fantastic bullish reversal. As the tweezer is a trend reversal method, traders can enter right at the start of a new trend. In this way, the tweezer can offer a higher return against a small risk. The ideal stop-loss level is below the tweezer bottom low (with some buffer).

Now, let’s look at an example of a tweezer top pattern from an actual chart:

In the above daily LTC/USD chart, the price moves up and forms a tweezer top pattern at the resistance level. Accordingly, the price moves lower with a decent profit. Using this method, the sell entry is valid from the second candle’s closing, and the stop-loss should be set above the first candle’s high.

How Reliable are Tweezer Tops and Bottoms?

In financial trading, investors are advised to use multiple methods to increase the probability of a trading entry. Using tweezer patterns are a reliable way to catch a trend from its beginning. But can a trader rely only on the tweezer method in order to make a successful trade?

When a tweezer top appears at a swing high, it indicates that bulls are getting out of the market — and bears may be taking over. The reverse is true for a tweezer bottom at a swing low. Therefore, investors should manage their trades by closing a profit and moving the stop-loss to break-even. Overall, the tweezer trading method is profitable — provided that traders can match this pattern with other signals for additional confirmation like support, resistance, market context, volume or trend. 

Tweezer Candlestick vs. Other Trend Reversal Patterns

Let’s compare the tweezer candlestick with other patterns, so that investors can make more strategic trading decisions.

The head and shoulders pattern is a series of price actions that explains how and where bulls are failing to regain momentum as bears take control over the price. However, this method needs considerable time to complete, as the trading entry only becomes valid once the price breaks out from the “neckline.”

The above BTC/USD chart shows a head and shoulders pattern forming. It becomes valid after breaking below the neckline. However, this is a daily chart, and it takes almost two months to complete the pattern. Therefore, investors who focus on using the 

 in their trading have fewer trading opportunities than the tweezer top offers.

 are reversal patterns which form at swing lows and swing highs, respectively. The main difference between these patterns and the tweezers is that morning and evening stars have three candlesticks, which can explain investors’ sentiment more accurately than tweezers patterns, which have only two.

The above idealized images show the morning star and evening star patterns. The morning star pattern features a strong bearish daily candle, indicating a significant selling pressure in the price. The small bearish daily candle which follows it indicates that the price is still in bear territory, but with weak momentum. 

Finally, a large bullish daily candle closes at the first day’s high on the third day. The weakness of sellers and the strength of buyers is the major indication of the price reversal.

In tweezer patterns, comparable price action occurs, but it takes two days to change the momentum instead of three. Therefore, we can consider morning stars and tweezer patterns to be similar indicators, since both of these patterns feature a strong price reversal. If a price reversal takes too long for a tweezer pattern to emerge, it may still form a morning or evening star pattern.

 is a bullish reversal pattern which appears at a swing low. This pattern starts with a bearish daily candle, which attracts sellers. However, a small bullish candle appears the next day, which can be thought of as a correction to the previous bearish candle. Two consecutive bullish candles appear on the next two days, closing the action above the first day’s high. It’s clear that the selling momentum on the first day is eliminated with three bullish candles which close the third day above the first candle’s high.

Let’s see what the three white soldiers pattern looks like:

Both the three white soldiers and tweezer bottom candlestick patterns are bullish reversal patterns. Once they appear at a support level, the price becomes attractive to bulls. Again, these patterns have a high level of accuracy, but investors should consider other confirmation from trend, volume, price context, etc.

The tweezer top and bottom candlestick patterns yield reliable exit and entry points, respectively, in any trend-reversal trading strategy. Therefore, the best approach for using this indicator is to combine it with other technical analysis indicators to increase its efficiency. However, before following these candlestick patterns with real money, it’s recommended that investors practice using a demo account.

When using the tweezer candlestick patterns for trading, keep in mind the following rules:

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Trading Tweezer Top and Bottom Candlestick Patterns in Crypto

Is the crypto sell off slowing down? Look out for bullish reversals by including falling wedge patterns in your trading arsenal.

The falling wedge is a bullish price pattern that represents a story about the market in which bulls are preparing for another push. In cryptocurrency trading, buying an asset from a logical position is more likely to provide success than randomly buying an asset without applying 

. Therefore, keeping falling wedge patterns as a main pattern in your trading checklist is a great way to make money from the crypto market. This article explains the falling wedge pattern’s bullish indication in crypto charts, along with its use as both trend continuation and reversal pattern.

Is a Falling Wedge Pattern Bullish or Bearish?

A falling wedge pattern is bullish, although it appears after a bearish trend. It signifies that bulls have lost their momentum, and bears have temporarily taken control over the price. As a result, the price starts to make new lower lows, but at a corrective pace. 

Crypto prices rarely move in a straight line. Rather, like most assets they tend to zigzag, with swing lows and highs forming, even if the price remains within a trend. Therefore, investors often experience temporary bearish correction within bullish trends, giving rise to patterns like the wedge, triangle, flag or channel. 

These are signs that buying pressures are being reduced due to profit-taking. The uniqueness of the falling wedge pattern is that it can produce a higher accuracy of trade than a traditional descending channel.

Although both the descending channel and falling wedge are bullish reversal patterns, the falling wedge has better accuracy than the descending channel, whose price corrects lower by maintaining an equal distance between swing highs and lows. 

On the other hand, with the falling wedge, swing levels squeeze toward each other, which is a sign of a deeper correction. Before making a trading decision, investors should focus on where the major trend is heading and how volumes are performing.

Let’s look at the pros and cons of the falling wedge pattern:

A price pattern on a cryptocurrency chart isn’t randomly formed. Instead, it represents a story about buyers’ and sellers’ activity. Likewise, the falling wedge pattern, which occurs after a bearish trend, represents a narrative about what bulls and bears are doing — and what they might do next. 

A bullish trend forms after a significant event by encouraging buyers to long an asset with the hope of future price appreciation. However, it’s often difficult for investors to hold this position for a long time. They usually book a profit after getting some benefit, often adding more positions when the price is discounted. As a result, the bearish wedge pattern that we see after a bullish trend is partially the result of buyers’ profit-taking. Once the profit-taking is over and the price finds a dip, investors will begin to buy again. 

The trading approach with the falling wedge pattern is to find when the correction is over and the bullish trend is likely to resume. The global financial market is driven by institutional traders who need liquidity. There have to be enough buyers to sell and enough sellers to buy. Therefore, patterns like the falling wedge indicate that institutional traders who’ve created the bullish trend might open another buying position, resuming the trend after a discount.

The above image demonstrates a falling wedge pattern appearing after a bearish trend. Bitcoin’s price moves sharply lower from $64,000 to $30,000, but despite strong selling pressure, it doesn’t break below $30,000. As a result, the price remains corrective and forms a falling wedge. In this pattern, a new lower low and lower high are formed as the price remains within converging trend line support and resistance. 

Besides swing levels, investors should monitor how the volume is changing. As the price moves to a consolidation phase, the volume should reduce due to less trading activity. However, once the breakout happens, it should be supported by higher volume.

The above image shows the same BTC/USD chart with the trading volume added. Here we can see that the volume is higher at the beginning of the falling wedge pattern, but volume bars start to move lower as the wedge pattern extends. Once the price moves up from the wedge pattern with a bullish breakout, the volume begins to rise again.

A falling wedge is a reversal pattern, but investors can use it as both reversal and as continuation of a trend.

The price of a cryptocurrency moves by creating swing lows and highs. As a result, investors experience minor bearish swings within a major bullish trend. Therefore, a reversal from a minor swing level is ultimately a continuation of the major trend.

In the above image, the major bullish trend is marked in green where the price is moving up by creating higher highs. However, when we look inside the bearish correction, we see the falling wedge pattern begin to form, with the major trend resuming after a breakout. Therefore, although the falling wedge pattern appears after a bearish trend, it’s still within the long-term bullish trend.

The above image gives a practical example of a wedge pattern as the continuation of a bullish trend on a real chart. Here, the BTC/USDT market trend is bullish, when a falling wedge breakout from the minor bearish swing resumes the trend and makes new, higher highs. Therefore, the trend continuation is confirmed once the price moves above the falling wedge with a bullish candle.

The image above shows how to open a buy trade from the falling wedge breakout. In this method, the buying setup is valid as long as the price remains above the wedge pattern’s low. In addition, the stop-loss should be below the swing low, with some buffer. 

As the falling wedge pattern is a strong bullish continuation pattern, it often produces more profits. Therefore, traders can hold the buy position until the price reaches any significant resistance level.

With cryptocurrency trading, a falling wedge reversal pattern from a significant price level may provide more profits than it would in traditional markets. However, finding the right pattern from the ideal location is important. 

The falling wedge pattern appears in a swing low, indicating that bears are losing their momentum. Therefore, the first sign of a highly profitable wedge pattern is to find it after a considerable downward movement. It’s hard to determine whether the bearish trend will continue or reverse, so finding the pattern at a bottom increases the probability of a trend reversal. 

Look at the chart to see a strong downtrend at the beginning which is losing momentum at the bottom.

The above image explains how we can measure the strength of a bearish trend by looking at swing lows. If bears become unable to make new lower lows with a long distance, it’s a sign that they’re losing momentum.

Therefore, to trade the falling wedge pattern as a major market reversal strategy, we need to ensure the following confirmations:

Let’s see how the falling wedge pattern works on a real chart:

In the above daily LTC/USDT chart, the price collapses from the $400.00 resistance level but loses its momentum at $105.00. Meanwhile, the price forms a wedge pattern, as supported by the decrease in volume. As a result, once the bullish breakout occurs, it shifts the trend from bearish to bullish.

The trading approach of the falling wedge reversal pattern is similar to the continuation system. The trading entry becomes valid when the price moves above the falling wedge pattern with a strong bullish breakout. Again, the stop-loss should be below the support level, with some buffer. Trading in higher time frames often allows traders to hold the gain for years. However, taking some profits from strong resistance levels is important.

The above image shows how to open the buy trade from the support level using the falling wedge pattern. The image clearly shows that the volume decreases with the wedge formation, which is a sign of lower trading activity. However, once the price breaks above the SL level, the volume starts to rise. 

On the other hand, there is no guarantee that the price will come back to the support level after breaking above the falling wedge. In that case, traders can open the first buy entry immediately after the breakout, and the second entry after completing the correction.

Falling Wedge Patterns and Other Bullish Reversal Patterns

The falling wedge pattern is one of the bullish reversal patterns which form after downward pressure. However, there are many patterns which work like the falling wedge. Therefore, traders should know the key differences between the falling wedge and other patterns in order to better understand its trading accuracy.

Falling wedges and descending triangles look similar, and can confuse traders attempting to choose the correct pattern. The biggest similarity between the falling wedge and descending triangle is in their implications for price, allowing investors to understand what’s happening in the market and what might occur next. 

These patterns usually appear after a bearish trend and indicate that bulls and bears are both losing their momentum. However, the price direction after the two patterns isn’t the same. Any bearish breakout after a descending triangle increases the possibility that the existing bearish trend may continue.

, the price moves forward with lower highs forming, indicating that bulls are losing momentum. However, there are no lower lows formed, which signifies that sellers’ dominance remains unchanged. This repeated testing of the horizontal support indicates that the level is becoming weaker. Once the price moves below the descending triangle pattern, it will likely extend the existing bearish trend. 

Now, let’s move to the trading approach using the descending triangle pattern:

Based on the above example, let’s distinguish the key differences between the falling wedge and descending triangle:

 forms after a bullish trend, and moves lower by maintaining an equal distance between swing levels. It indicates that bulls are taking profits and they might continue the momentum. During the bull flag formation, the trading volume should dry up and push higher on the breakout. Identifying the bull flag in the price chart involves some complexity, as it contains several components. Traders need to have a clear understanding of bull flag components and trading approaches. 

Let’s look at the approach to trading with a bull flag pattern:

The above image represents the key differences between the bull flag and the falling wedge pattern. Although both of these patterns work as bullish trend continuations, there are some key differences that a trader should know:

While it’s difficult to find the ideal falling wedge pattern in perfect market conditions with cryptocurrency trading, investors can nevertheless apply the rules and concepts above to find lucrative trading opportunities.

Overall, falling wedge patterns are a great way to spot trend reversals and find profitable ways to buy before a new trend emerges. However, investors need to be aware of other factors that should be present to confirm the pattern. The key points that might help you to begin with this pattern are as follows:

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Falling Wedge Patterns: How to Profit from Slowing Bearish Momentum

Marubozu candlestick is a lesser-known technical indicator. But did you know it is effective to predict the future price direction of an asset?

The Marubozu candlestick is a lesser-known pattern among crypto traders, as it’s rare to find it on trading charts. However, Marubozu formations are easy to identify once you know what to look for. Once the Marubozu pattern is spotted, you can determine how effective its signal may be based on the pattern’s location within a larger trend.

While not occurring frequently, Marubozu patterns can be found on any chart time frame for any cryptocurrency. In this article, we’ll discuss what the Marubozu candlestick pattern looks like, and how to trade it once you’ve spotted it.

We’ll also review other indicators you can use to confirm a Marubozu pattern, and what limitations exist for trading it.

What Is the Marubozu Candlestick Pattern?

A one-candle pattern, the Marubozu candles look like a rectangular block because it has no wicks (or upper and lower shadows). It is a 

 used to predict the future direction of an asset’s price.

The pattern can be colored either red (bearish) or green (bullish, sometimes colored black). Candlestick patterns and interpretations originated in Japan in the 18th century. Marubozu is a Japanese word meaning “bald” or “shaved head” — which makes sense, as the pattern is missing a wick to the topside. 

The Marubozu pattern is simple and straightforward, though many experienced traders may not have heard of it. Its lack of popularity among traders may have more to do with its rarity than its actual utility.

The message behind the Marubozu pattern is simple: prices which trade strongly in one direction can often lead to a continuation and follow-through.

There are three different places within a larger trend where the Marubozu pattern may form:

There are times when a trend reverses slowly in an almost stealth-like manner. At such times, an important news announcement may add fuel to the new trend as prices move strongly in one direction. In a case like this, a Marubozu candlestick pattern may be found early in the new trend.

Marubozu Pattern in the Middle of a Trend

, as a trend reverses, a battle may be waged in which the followers of the old trend are still hopeful it will continue. At the same time, traders who believe a new trend has started cast their vote via their trades. Initially, there’s a struggle, and then a flashpoint appears when the new trend breaks out.

During this breakout, the old trend’s followers have relinquished control. Everyone is on board with the new trend. Because the supply of buyers and sellers is lopsided, the trend takes off with strength. Marubozu candle patterns are frequently found during the middle of market trends.

A Blow-off Top may House a Marubozu Pattern

A blow-off top is the end of a mature rally, with price appreciation accelerating in a last gasp of fear of missing out (FOMO). 

By the end of the trend, the whales have exited, and the market reverses course shortly thereafter. 

What Does a Marubozu Candle Pattern Look Like?

A Japanese candlestick generally has two portions to its formation: the body and the wicks, also called shadows.

Protruding from either end of the body is a small stick called the wick or shadow.

What makes the Marubozu formation unique is that it’s missing shadows, or wicks. This gives the pattern a big rectangular block look.

The color of the Marubozu is the sole differentiator between bullish and bearish.

Identifying the Marubozu Candlestick Pattern

The Marubozu pattern indicates that a cryptocurrency has been trading strongly in one direction, as it opens at one extreme and then closes at the other. Prices have not traded outside of the opening and closing price extremes, implying that a strong directional trade has been taking place.

To distinguish a bullish Marubozu pattern from a bearish one, simply consider the color of the candlestick’s body.

The bullish Marubozu candles pattern implies that the price opened at the lowest point and closed at the highest point. This happened because buyers were in control of the price for the duration of the candle’s construction.

The color of a bullish Marubozu will be green, blue or white.

The bearish Marubozu pattern, formed when prices open at the high price for the candle’s formation and close at the lowest point. In essence, the open is the same price as the high, and the close is the same price as the low.

The color of the bearish Marubozu candlestick will be either red or black.

Using the Marubozu Candle to Trade Crypto

As mentioned, although Marubozu candle formations can be found on any time frame chart, they are fairly rare. When they do appear, the one-candle formation with no wicks suggests strength in the current trend. The pattern signals it could be either a strong uptrend, or a strong downtrend.

The bullish Marubozu forms when the price trades swiftly to the upside. The candle’s open forms the low price, and the Marubozu closes the candle at the high price. 

Once you spot the Marubozu pattern, consider the part of the larger trend in which it has formed.

In the 2-hour Bitcoin chart above, the bullish Marubozu appears right after another strong bullish candlestick, which loosely resembles a bullish Marubozu. This double combination appears toward the beginning of a new trend, which suggests that the trend is just starting.

You’ll rarely see an isolated Marubozu running against the main trend all by itself. So when the bullish Marubozu appears, the trader can expect more upside potential.

As a result, opening the trade on the next candle — while placing a stop loss just below the swing low — is one way to trade the bullish Marubozu.

The bearish Marubozu is created when the candle opens near the high opening price and closes on the low. This candle suggests a strong downward trend has been in force, leaving behind a big red or black candle with no wicks.