The piercing chart pattern is a multiple candlestick chart pattern. It usually performs after a long downtrend for reversal. This chart pattern is complete with two consecutive candles. One is Bearish and the second is bullish. This bearish candle indicates that the market is following a downtrend.
The bullish candle tells us the bearish movement is over and the ball is completely in buyers’ hands. After the formation of this chart pattern, the market can take a reversal from downward to upward, usually, this chart pattern performs on the new, fresh, low, or support zone You have to confirm before classes of the trade on this chart pattern because this chart pattern is infrequent, and it performs sometimes.
You must know the candlesticks chart reading if you want to catch this chart pattern on support or new fresh low. The candle sticks chart reading plays a more important role in doing technical analysis If you don’t have basic about how to do technical analysis, then maybe you find out this chart pattern or support or take a trade on it.
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How piercing chart patterns perform on chart
Every chart reader must know how to pair some chart patterns performed on the chart. We know it is a reversal chart pattern and its primary work is a reverse trend from downward to upward. The piercing chart pattern typically has two continuous two candles and it indicates the market has changed its mood toward the bullish side.
First Candle =- This chart has a healthy bearish candle that represents the market’s strong bearish momentum. In bearish candle has a long body with a small will that represents, the seller is controlling the market.
Second Candle =- The second candle is a green color candle that represents buyer control in the market. But you must keep in mind the bullish candle must be close to around 50% of the bearish candle. And it’s opened from prior red candles with a little bit of gap down. This chart pattern is called the piercing chart pattern.
This chart pattern tries to show us, the buyer is taking possession from sellers. We can easily determine it with the size of the candles. If the reading candle is too large and it’s against a bullish candle covering more than 50% it means buyers are in a strong mood. If the bullish candle gives a close of around 30%-40% we can understand buyers just struggling to take over the position from buyers.
It would help if you learned about candlesticks, on the candlesticks study we can learn more new things. Because in the market, If you know how candlesticks are performed and what are conditions to follow in the candlesticks. Sometimes this chart pattern does not work well, traders should consider another factor to check its reliabilities.
How to trade Piercing Pattern
It’s come to know, how to take a trade on piercing chart patterns. This chart pattern is mostly performed on the bottom. A trader should have their setup to trade on it. We are sharing our views or prospects on how to take a take on it.
In our view, traders should wait for its complete formation and must check its formation if the piercing chart pattern has performed according to our matched conditions. We will take trade on after breaking its high.
In another way, the trader must check its formation, the bullish candle must be close to 50% of the bearish candle. If it’s not giving close about 50% then trade ignores it or do more study to refine our entires.
It’s not hard to take a trade if the trader has full knowledge of technical chart patterns. if traders can recognize every single candlestick chart pattern on charts, then it’s not hard to take the trade. Traders not be confused and feel fear to take a trade on it.
Entry – Trader must take entry on its high, we know well it’s three candlestick combination chart pattern. The first is red and the second is bullish and opened with a little bit of gap down. After confirming that the trader should wait for the next candle that breaks the high of the last two candles bearish and bullish.
Now our piercing chart pattern has been confirmed, a trader can enter on its high. But before entry trader should review their checklist. Entry on it’s not complicated if this chart pattern performed on to the support or new bottom.
Exit – Exit can be done in two ways first is by stop-loss, second is take profit. First, we are talking about making a profit. Trder should place take take-profit order on 1:2 RR. Sometimes the market doesn’t give one each two, so trader books their profit according to market conditions.
The second one is a stop loss, traders must place their stop loss below the piercing chart pattern with bit buffering. Sometimes market comes to the low of a piercing chart pattern and hits the stop loss of some traders and the market moves back from that level. So this is the main reason to place their stop loss with a little bit of buffering.
Example of Piercing chart pattern
With the help of examples, we got more clearly. If we don’t learn anything without examples maybe we will succeed in the market.
In this example, you can see there are reversal chart pattern is performed and gives a perfect signal to traders for reversals.
Most of the time this chart pattern is spotted on the bottom and also a chance it’s found on the support level. In this example market coming down and the trend is in a downtrend. After a clear downtrend, the chart pattern has performed and the green candle is closing around 50% of the green candle.
After the green candle, there are one more green candle is also formed that gives a clear signal for buying to traders. Traders must keep one thing in mind if the main red candle is long and after the green candle if there is one more candle but that candle is not giving close above the red candle.
This type of formation gives more reliable confirmation. Traders must consider and try to find this type of formation.