Big Shadow

A big shadow refers to a Candlestick Pattern - 20230221094146 that indicates a potential reversal in price trend. The pattern is characterized by a long upper or lower shadow, which indicates that the market has moved significantly in one direction during the trading period, but then retraced most of the move to close near the open.

A big shadow with a long upper shadow indicates that the market opened and moved higher, but then sellers entered the market and pushed the price down to close near the open. This pattern is also called a Shooting Star.

A big shadow with a long lower shadow indicates that the market opened and moved lower, but then buyers entered the market and pushed the price up to close near the open. This pattern is also called a Hammer.

Both patterns suggest that the market has reached a turning point and that the previous trend may be coming to an end. Traders often use big shadows as a signal to enter or exit trades, or to place stop-loss orders to limit their losses in case the trend continues.

Trading the big shadow

• The big-shadow candlestick is much larger than the previous candlestick, the big-shadow candlestick has a wide range, and the big shadow candlestick is the largest candlestick the market has seen for some time. Ideally, the big shadow should have the greatest range of the previous five candlesticks.
• The big shadow stop loss is placed beyond the big shadow. For a bullish big shadow, the stop loss is placed a few Pips below the low of the big shadow candlestick.
• The buy stop is placed below the engulfing candlestick.
• This setup works better if there is room to the left.
• Take profit is placed at the nearest zone.

META

Status:: #wiki/notes/mature
Plantations:: Candlestick Patterns
References:: Naked Forex