Falling Window Candlestick Pattern – Trading Ideas and More

Falling Window Candlestick Pattern: In the field of stock market analysis, technical analysts utilize charts and candlestick patterns to evaluate stock prices and predict future trends. Each pattern contains valuable information that provides insight into market direction.

By analyzing and interpreting these patterns, analysts can make informed predictions about the future movements of stocks, allowing investors to make informed investment decisions.

In this article, I will explain the Falling Window candlestick pattern, its characteristics, and the trading steps using this pattern.

falling window candlestick pattern

The bearish window candlestick pattern is a two candlestick pattern that strongly indicates a bearish movement in price. A two candlestick pattern is called a bearish window pattern only if both the candlesticks are bearish candles and there is a gap between them. That is, the high point of the second candle must be lower than the low point of the first candle.

The bearish window candlestick pattern is typically used as a bearish continuation indicator. When it appears in a downtrend, it usually indicates continuation of bearish momentum. Therefore, its appearance provides an indication to the trader to maintain a short position if he has already taken one and also provides an indication to take a new short position in the security.

Falling Window Candlestick Pattern – Formation

For a two candlestick pattern to be called a descending window pattern, two conditions must be met:

Condition 1 – Both candles should be bearish (red) candles.

Condition 2 – There should be a gap between the two candles. The high of the second candle should be lower than the low of the first candle.

Bearish window candlestick patterns frequently form in the market during both downtrends and uptrends. However, it is generally used to obtain a bearish continuation indicator.

Falling Spear Candlestick Pattern – Psychology

The second candle of this pattern begins with the gap falling due to high selling pressure in the period. The selling pressure is so high that the high price of the second candle is not even close to the low price of the first candle.

The formation of a Falling Window creates a negative outlook and more sellers will enter the market. This is why prices usually move lower after a bearish window pattern is formed.

The gap between the two candles also acts as a resistance zone and whenever the price moves back into that zone, there may be more sellers in the market. So prices are likely to fall.

Key features of the Falling Window pattern

1. The two candles formed are in a downtrend (red candles) with a gap between the low price of the first candle and the high price of the second candle.
2. This pattern indicates a bearish continuation and indicates bearish momentum.
3. The gap between two candles acts as a resistance zone.

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Falling Window Candlestick Pattern – Trading Ideas

Traders must ensure that the previous trend before this pattern was formed was a downtrend. When this pattern is formed in a downtrend, here are some guidelines for trading:

• Entrance – If the price of the security begins to trade below the closing price of the second candle of this pattern, a trader can take a short position on the security.

• target – Traders can exit a trade when the security’s price reaches near an immediate support zone. Once this level is reached, you can also book a partial profit on the trade and hold the remaining position until the next support level.

• Stop Loss – The stop loss should be placed just above the ‘gap’. This means that the stop loss should be set at or just above the closing price of the first candle.

Falling Window Candlestick Pattern – Example

In the ICICI BANK chart above, the period is 1 day. During a downtrend, you can observe a bearish window pattern forming. The formation of this pattern indicates continuation of bearish momentum.

When this pattern was formed, traders could take a short position if the price fell below Rs. At 175.75 I set a stop loss at Rs. 180.55

Read more: Understanding Harami Candlestick Patterns

conclusion

In this article, we have discussed one of the most frequently occurring candlestick patterns, the Falling Window candlestick pattern. A descending window pattern can appear anywhere in the market, and its formation usually indicates bearish momentum.

However, it is better to only place sell trades when this pattern appears during a downtrend rather than when it appears during an uptrend. This is because it has historically been observed to work better as a bearish continuation indicator.

Traders should not trade based solely on the formation of this pattern, but should also include other technical tools and indicators to confirm price predictions. What are your views on this pattern? Let us know in the comments section below.

Written by Praneeth Kadagi

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