The Japanese word "hook, catch, ensnare" is where the name of the Hikkake candlestick pattern comes from. Daniel L. Chesler, CMT, was the first person in the Western world to name the Hikkake pattern. He was trying to describe a pattern that traders seemed to get stuck in one way while they were trying to move in the other direction. From three to seven candlesticks, the Hikkake Figures is a multi-candlestick design. The candlesticks of this pattern are usually four or five.

Technical experts and traders use the Hikkake pattern to find market turning points and continuations. People who look at market price data can see this simple pattern in Japanese candlestick charts, point-and-figure charts, or regular bar charts.

Identifying Bullish Hikkake Pattern

For example, the Hikkake candlestick pattern is a complicated set of bars or candlesticks that starts to move in one direction but quickly changes direction and begins moving in the opposite directiona multi-bar or candlestick pattern formed over several trade sessions. Moreover, five or six price bars are common, but the arrangement can have as many as seven. The most important things about the pattern are:

• Price Trend Overview: There is a trend in terms of whether prices are going up or down.
• Mother Bar: This first-priced bar is long and can be in any color. It is often called the "mother bar."
• Inner Bar: The range of the second price bar, which is sometimes called the "inner bar," is inside the range of the first bar.
• Harami Pattern: Anywhere from higher to lower than the day's opening price is fine as long as the first candle's body completely covers the second candle's body. The inner bar pattern also called the harami Candlesticks pattern, is made up of these first two price bars.
• Third Price Bar: The low point of the first setup's inner bar pattern is where the third price bar follows its downward path. This price bar can have two possible endings: positive or negative. Very rarely will it go even higher and close above the high of the second price bar, finishing the positive Hikkake candlestick pattern.
• Continuation of Bars: The price bars that follow the third one depend on how it ends. The vast majority of these bars are positive and are going up to break through the high of the second bar. It's the last bar that closes above the high point of the second bar in the pattern.

In all likelihood, the price will continue rising after the trend ends. In a bullish Hikkake pattern, the main parts are the downward fake-out, the inner bar pattern, and the bullish turnaround move that breaks above the inner bar pattern. Whichever way the price went before doesn't matter.

How to Trade The Hikkake Candlestick Pattern

Once you see a well-formed Hikkake candlestick pattern on your charts, there are many intelligent ways to start trading to capitalize on the coming trend turnaround.

Pullback Entry

Some strategies include waiting for a return or flashback to the breakout gap after the Hikkake is finished. This area often offers help or pushback. As the price corrects back into the gap, you can go long or short at better levels and with less risk. Moreover, traders can put protective stop orders above or below the candle bodies on each side of the empty gap.

Bullish Breakout Entry

A buying chance appears when a Bullish Hikkake pattern shows up after the breaking of an upward trend. You can ride the long wave of negative movement, which means that the last move is making a strong return. You can put a stop order under the inner light of the Hinoki's low point.

Aggressive Reversal Entry

When the third candle closes above or below the inner bar, go short or long to form a Hikkake Candlesticks pattern. If you arrive early and the turnaround stops, you risk injury. Avoid losing money by using stops outside the outside bar high/low. What you do next depends on your risk tolerance and pattern certainty. Mix tactics to increase your Hikkake sales profits.

Advantages of the Hikkake Pattern

Ease of Identification

The Hikkake Figures design is great because it is easy to use. Looking at a price chart and finding the trend takes work, even if you are new to technical analysis. The three-bar pattern consists of the setup bar, the inner bar, and the proof bar. It is easy to spot without having to do complicated math or use expensive drawing software.

Versatility

The Hikkake candlestick pattern works on currency, equities, ETFs, and commodities. It allows for swing trading, daily trading, long-term investment research and much more.

Defined Exit and Entry Points

Trading experts use the Hikkake pattern to find clear entry and exit points. This is very helpful for deal management because it can help set levels for take-profit and stop-loss, which limits the amount of money that can be made and the amount of risk that can be taken.

Trader's Edge

The pattern is distinguished by the fake breakout, which tricks other traders into believing that a price move will continue in the breakout's direction. Traders who understand the Hikkake pattern have an edge over traders who fall for traps when these false breaks happen.

Drawbacks of the Hikkake Pattern

False Signals

Any trade pattern, including the Hikkake candlestick pattern, has some problems. Occasionally, the pattern may send mixed messages, indicating that the price will continue to rise or fall when it actually doesn't. As a result, the seller might lose money.

Effectiveness Varies

The Hikkake candlestick pattern works better or worse, depending on the market's performance. Fake breaks may happen less often in quickly moving markets, making the trend less reliable.

Requires Confirmation

Trades should not be based on the Hikkake pattern alone. All basic analytical tools perform well with additional indicators to corroborate indications and boost trade success. Ensure to check the Hikkake candlestick pattern signal using momentum oscillators, volume markers, or other Hikkake Figures.