Find all details regarding Abandoned Baby Candlestick Pattern here. Get detailed information like its types, Analysis, Formation, Trading Tips using this pattern & more.
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About Abandoned Baby Candlestick Pattern
The Abandoned Baby Candlestick Pattern is unique and hard to find, like most Japanese patterns.
It is a three-candle pattern that can appear during a downward trend or upwards trend and can be considered a strong signal for a trend reversal.
In terms of appearance, the abandoned baby looks like a Dojistar with no real body. However, it is surrounded by two candles with real prominent bodies.
As a result, it got its name; the abandoned baby candlestick pattern. The candlesticks surrounding the abandoned baby are known as the parents.
As mentioned, the abandoned baby candlestick pattern can be formed during both upward and downward trend.
Therefore, the two types of abandoned baby candlestick patterns are bullish and bearish. Let us now take a brief look at both the patterns.
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Types of Abandoned Baby Candlestick Formation
Abandoned Baby Pattern has 2 types –
Bullish Abandoned Baby Pattern
The bullish abandoned baby pattern is formed during a downwards trend and indicates a bullish reversal.
In the case of a bullish abandoned baby pattern, the first candle is bearish, i.e., red, and is part of a downwards trend.
The next candle that forms is a Doji star that forms below the first candle’s closing price. Once this candle is formed, the next candle leads to a bullish trend.
This one is formed above the Doji star, and its size is similar to that of the first bearish candle.
Bearish Abandoned Baby Candlestick Formation
The bearish abandoned baby pattern is formed during anupwards trend and indicated a bearish reversal.
In the case of a bearish abandoned baby pattern, the first candle is bullish, i.e., green, and is part of an upwards trend.
The next candle that forms is a Doji star that forms above the first candle’s closing price. Once this candle is formed, the next candle leads to a bearish trend.
This one is formed below the Doji star, and its size is similar to that of the first bullish candle.
Analysis of the Abandoned Baby Candlestick Chart
As mentioned, the abandoned baby pattern indicated a trend reversal and can occur in both trends.
There an abandoned baby at the end of a bull trend indicates that the bears are going to take over; thus, sellers are going to dominate.
In contrast, an abandoned baby at the end of a bear trend indicates that the bulls would come stronger and increase the prices.
Therefore, the buyer tends to dominate in this case. The best part about an abandoned baby is its accuracy, which makes it unique.
You must have found us focusing on keeping in mind all the factors while taking a market position.
However, an abandoned baby candlestick pattern is an indication of a confirmed trend reversal, and you might not need other tools.
Though identifying this pattern can be difficult at times, but once you do, make sure you enter and exit a position accordingly.
The parent candles in this pattern do not require a lot of analysis as one forms a trend while the other one leads to a trend reversal.
Doji Star Formation
However, the Doji star is the game-changer in this case. In a bullish trend or a bearish abandoned baby pattern, the Dojistar is formed above the green candle.
The Dojistar depicts that the closing and opening price is almost the same. This means that the buyers have started losing their grip, and sellers have started dominating the market.
This is evident with the formation of the next red candle. On the other hand, the Dojistar is formed below the red candle in a bearish trend or bullish abandoned baby.
In this case, also, the open and close price is the same. This implies that the sellers are no more dominating the market, and the power is simultaneously moving towards the buyers.
Once the buyers gain enough power, they move the market upwards, and it marks the start of a bull trend.
How to trade using Abandoned Baby Candlestick Pattern?
Well, the pattern is quite unique and hard to find. However, most traders believe that it is a confirmed indication of a trend reversal.
Therefore, one must enter or exit a position accordingly once they identify this pattern. However, we have a list of pointers that you should keep in mind while trading an abandoned baby candlestick pattern.
Keeping the below-mentioned points in mind can help you in increasing your accuracy while trading.
Unlike most patterns where we suggested you wait for the perfect entry, the abandoned baby pattern is quite different.
Since the pattern confirms a trend reversal, you can enter or square off a position the moment you identify it. Doing so will help you let your profits run and cut your losses short.
You must have heard people focusing on the importance of a stop loss. Well, identifying the right point for a stop loss is equally important.
In case of a bullish abandoned baby pattern, you can place a stop loss below the wick of the Dojistar formed.
If you are not willing to minimize your risk, you can put a stop loss at the lower wick of the bullish candle. You can use the bearish abandoned baby pattern for shorting a stock.
While doing so, you can put a stop loss at the upper wick of the Doji star. Else, you can put stop loss at the high of the bearish candle to minimize the risk.
Setting your targets straight, while trading is important and books profits. For this, you can use indicators like a Fibonacci retracement, Moving oscillator, etc.
Once you get a hold of these indicators, you can trade very easily.
Conclusion – Abandoned Baby Candlestick Pattern
The pointers mentioned above will help you while trading an abandoned baby candlestick pattern.
In fact, you must keep these points in mind while trading any pattern because entry points, targets, and stop losses are extremely crucial.
An abandoned baby pattern can be a little hard to find on the chart. Therefore, it is recommended to use software, etc. for the same.
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