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April 17, 2018, 07:34:54 AM |
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Undoubtedly, for a trader, finding a profitable long-term trade coin strategy is paramount. The problem is how to find that strategy? And how can you use the popular coin trade technique to make money?
In 1998, in a study by Gaginalp and Laurent, they performed a backtest on 10,000 different price data using a Japanese candlestick pattern to test profitable trading strategies. They found that only the three candlestick pattern can generate profits throughout the three quarters traded. Here is our explanation of these patterns and how to use them.
The three-black-crow candle pattern
It is a reversal candle pattern that trends downward and signals for bearish. In other words, it may indicate that the current bull market has ended and market sentiment has turned negative.
This pattern consists of three long candlesticks that trend downward and each is lower than the previous one (like a staircase). When using along with Support &
resistance and the main trend of the market, it will outperform the traditional candle patterns such as pinbar or engulfing candles.
This candlestick pattern is a signal for buyers to take sideways and stop trading after three decrease cycles that appears as three candlesticks. Still, it’s also an opportunity for sellers to gain some profit.
If you are a long-term trader and this pattern appears then you should consider selling and stop trading for a while. Still, this could be a chance to make some money for short-term traders. But remember to use this pattern only when it in the uptrend for less risk.
The three-white-soldier candle pattern
This three-black-crow candle pattern has a counterpart known as the Three-white-soldiers, which attributes help identify a bullish reversal or market upswing.
The pattern consists of three long candlesticks that trend upward and each should open above the previous day's open, ideally in the middle price range of that previous day. As this pattern appears, it means we will have a small increase and trader can start to make entry.
Short-term traders should take this pattern as a sign to close position. The others could take advance of this short increase to make profit. Also, this pattern works best when the price of a coin is in a sustainable downtrend.
The morning-star candle pattern
Just like the three white soldiers, The morning-star is a bullish reversal pattern.
The morning-star or the Three Inside Up consists of three candle patterns: a bearish candle, a long bullish candle, and a doji in the middle in some cases. You still can trade even though the candles in the middle are slightly larger (but not larger than the candle before and after it).
To notice this pattern, look for three special candles:
The first candlestick should be a bearish one, showing a long fall in price. Follow by that is a doji that can be bearish or bullish. The doji has a short spread between opening and closing price and the closing price is normally lower than half of the previous candle. After the doji is a long bullish candle that has the closing price higher than the opening price of the first candle
If you are a short-term trader then you should close the deal when this pattern appears. Still, it could be the chance for others.
The Morningstar works best when the price of a coin is in a sustainable downtrend.
What you should know before using these candle pattern
Keep in mind that what you need to succeed is more than just these three pattern, You need to observe market movements closely as anything can happen.
Candle patterns are formed based on the price movements. Also, as this research only using data from US market, it may not be accurate when using in others market. Still, this would definitely worth to be in your trading strategy.
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