What is the Cradle Pattern?
To adequately understand candlestick patterns, you must have had a good understanding of Japanese candlesticks and all their attributes.
Ideally, cradle patterns should be an indication of reversal of the recent trend. It usually takes place in the course of a downward trend. The candles that go after the pattern need affirmation. Cradle pattern is a type of high-profit candlestick.
How Does the Pattern Begin?
The pattern begins with an elongated and black candle. It is possible to see this pattern during a downward trend. This happens as a result of the investors selling because the downward trend is disturbing them).
There’s a possibility that traders will also experience a stage of indecisive prices. There are Doji candles, Spinning tops, Hammer, and Inverted Hammer because prices will remain in a dangerous balance.
At the conclusion of the formation, begin an increase in the prices with an elongated and white candle (that displays the strength of the increment). The cradle pattern is diverse of the succession of Doji at the bottom.
Is the Name Perfect?
The name is perfect, in the sense that it is similar to a cradle in appearance. This turns the cradle pattern into a quickly identifiable reversal pattern.
It commences with the similar visual signal present in majority candlestick bottoming indications; a huge bearish candle at the base of a downward trend.
It explains the thorough selling at the base. The next day displays a candlestick indication such as a spinning Top, Hammer, Doji, Harami, and Inverted Hammer, because the selling had ended.
Now the candlestick trader should be observing for an affirmation “buy” candlestick signal. Note that, the little indecisive trading indications may appear for a few days before the “buy” indication shows up.
Conclusion
The cradle pattern exposes the trader’s emotion. If traders accept the huge dark candle as the headboard, the bullish candle turns to the footboard.
The cradle pattern development is now suspended at the base, insinuating that the trend should go up from this point.
Stephen Bigalow presents this cradle pattern in his second book with the title “High-Profit Candlestick Pattern; Turning Investor Sentiment into High Profits”.