How to Use One Day Patterns in Your Trades

As a trader, you should never overlook the power of one day patterns. While they are simple, they provide a clear picture of the market’s direction. In this article, we will discuss two one day patterns related to chart gaps.

The key reversal day pattern is less common than the simpler reversal day pattern, and its criteria are less flexible. It is significant when a candlestick reaches a higher high and a lower low with a higher close, indicating an upward reversal. Conversely, if a candlestick hits a lower low and a higher high with a lower close, it signifies a downward reversal. These key reversals denote significant market moves in the opposite direction of the current trend.

On the other hand, reversal days are quite common. This pattern indicates a downward reversal when a candlestick reaches new highs and closes at a new low. Conversely, an upward reversal occurs when a candlestick hits a new low and closes higher than the previous day. Although the rules for these reversal days are slightly flexible, they are valuable in detecting a change in market trend and should be used alongside other indicators.

If there is a new low closing on a bull market, it may imply that the bullish trend is ending, and buyers are ready to profit. Conversely, a new high closing on a bear market may signify the end of the sellout and the potential for a reversal. These moves are vital in determining market sentiment, and traders should avoid getting caught on the wrong side of the trend reversal.

Using one day patterns alongside other indicators can assist you in making smart trading decisions. These simple patterns can be a great help in identifying market moves, whether it is exhaustion, runaway or breakaway. Keep an eye out for indications of changes in market sentiment, and both key reversal days and reversal days could help with your decision-making.

Article by Luis Nieves

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