How To Trade The Abandoned Baby Candlestick Pattern

Candlestick patterns are one of the most popular tools in technical trading. It is one of the most reliable patterns among traders, as it makes it easier to understand and interpret market conditions. There are various types of candlestick patterns that allow traders to interpret information about price and momentum. 

It has been quite popular among traders because of the wide variety of trading information and facts it provides. One such specialized candlestick trading pattern is an abandoned baby pattern. 

An abandoned baby pattern is one of the most reliable patterns that will provide you a clear picture of the market. There are a lot of factors that you have to consider before you start investing in currency trading. An abandoned baby candlestick pattern will provide you detailed and deeper insights into the market condition. 

It is one of the rarest yet most reliable formations in a candlestick pattern. An abandoned baby pattern is used by traders to signal uptrend or downtrend trend reversal. This type of pattern can exist in both bearish and bullish trends.

In features and appearance, it is quite similar to other candlestick patterns like Doji Star or Cross. 

Before you start investing your hard-earned money, you must know the technical patterns to get better results. Read on to know more about how to trade the abandoned baby collection pattern. 


Understanding the basics of Abandoned Baby Candlestick Pattern

Abandoned Baby Candlestick Pattern is a specialized candlestick formation that comprises of three candlesticks. This type of trend can appear in both bullish and bearish candlestick patterns. 

When it forms in the downtrend, it signals a bullish reversal. It is often used by the traders to indicate the potential end. The candle that appears in the downtrend is either black or red. 

The other form of the Abandoned Baby Candlestick pattern is the bearish abandoned baby. This type of trend appears mainly in the uptrend. 

When an Abandoned baby appears in the uptrend, it signals that the potential buyers are leaving the market. This type of pattern is quite rare to observe. 


One of the biggest advantages of this candlestick pattern is that it is a confirmed trend reversal pattern. Therefore, if you follow this and spot it in the trendline, you can go ahead with the trading. You can proceed without confirming it from the other trading tools. 


Trading the Abandoned Baby Candlestick Pattern

Candlestick patterns are considered to be more accurate and reliable. As mentioned, an abandoned baby doesn’t require any confirmation. But you can still match it up with the other tools for better assurance. 

The pattern will help you understand how the market performs. There are various ways that you can use to trade in an abandoned baby. Here are some of the ways: 


Entering the pattern 


Bullish Abandoned pattern signals the weakening of the downtrend. Many traders take this opportunity to enter the market after the formation of the third candle. Most of the traders who enter above the third-bar use stop-limit order. 

Stop-limit orders are a combination of stop-loss and a limit order. It has features of both the orders that help in reducing the risk. There is a limit in stop-loss orders, and the trader will not face any further losses beyond that limit. Whereas in limit orders, you are setting the price that you can execute for trading. 

By setting these limits, you are telling the broker not to exceed these limits. These limits to trades will help in significantly reducing the losses. 

You can rest assured that you will not have to incur huge amounts of losses. However, the situations may go up and down, as per the market conditions. For instance, these may fluctuate in case there are certain price gaps. 

Entering the market after the third candle formation is a great opportunity for the buyers. Traders can enter this for the long-term as the markets will gradually rise with the time. 


Stop-loss orders

Risks and unexpected changes accompany trading. When it comes to trading, you have to analyze the market trends carefully. With time, you will determine how to maximize your profits. 

Using a stop-limit order is one of the efficient ways to minimize the number of losses. When a trader is setting a stop-loss limit, they have the option to set their limits. Therefore, the trade will close at the selected level, and the traders will not have to incur huge losses. It may not be the case every time. 

There are certain exceptions where the stop-loss limits might shift to the next level. It may happen because of price gaps or other market conditions. 

Therefore, as a trader, you must be equipped with different market conditions. You must keep yourself up-to-date with the news and other economic conditions that can affect the currency and the trends. 

You can place the stop-loss order just below the third candle to limit the risk exposure. You will not have to incur losses if you restrict the risk exposure by trading it this way. 


Profit target 

The abandoned baby candlestick pattern doesn’t indicate profit targets. Most traders use other tools to find and close profitable positions. 

Some of the traders’ common tools include Fibonacci Retracement, moving average, or the moving oscillator. 


Gap condition 

The Bullish abandoned baby candlestick pattern performs two big gaps. So, the traders who are interesting in trend coil analyze and measure the gaps. It would help you understand whether it is worth taking the risk or not. 

One must trade using this strategy when both these gaps are bigger than the true average range. 


Oversold conditions 

Bullish abandoned baby candlestick pattern indicates reverse and occurs when the market has gone down. The traders could take this opportunity to determine when it will be worth entering the trade. 

There are certain situations when the market is oversold. However, it is also an indication that it will soon turn around and pick that pace. 

One such way to determine whether it is worth it could be using an RSI Indicator. 

The indicator will show readings and help you understand whether it will be safe to invest or not. If the RSI crosses 80, you must not continue trading. It could lead to further losses and instability. Therefore, you must exit the trade after it reaches that level of a point. 


Benefits of Abandoned Baby Candlestick Pattern

As the name suggests, the abandoned baby is really abandoned. It will not overlap with the other two candles at any point in trading. 

The abandoned candle will not have any contact with the other two. You will understand the pattern when to invest in and how much to abandon from a particular position. 

This will make your trading successful and profitable. Different strategies can be adapted to the trend. Traders use the strategies mentioned above to determine and understand the patterns. 

Before you go ahead and start with the live trading, you must know the strategies. The pattern will help you in analyzing where the price gaps are. You will understand whether the trade is worth taking the risk or not with these patterns’ help. 

If you wish to stay in the market for long, you must consider analyzing the market patterns. The abandoned baby candlestick pattern will help you discover the reverse trend, and you will be able to determine when you should exit the market. 


Summing it up

The abandoned baby candlestick pattern is one of the most reliable and rarest trends. The pattern indicates trend reversal and appears similar to a morning star. 

It is a three-candle reversal pattern and stands apart from the other patterns because of the features. It appears similar to a morning star. However, it is not because, in the abandoned baby, the candles do not overlap. You can use this trading pattern to analyze and determine whether it will be profitable for you or not. 

For traders, it is very crucial to understand the uptrend and downtrend patterns. The abandoned baby pattern in its two forms will help you understand that and make informed decisions before investing. You should pay special attention to the trends to spot them properly. 

Before you start trading, you should always research the different methods of trading. Conducting market analysis is a very crucial part of trading. You should never proceed without understanding the risks and rewards of trading. You can make the trading pattern profitable if you can decode and analyze the market conditions well. 

We have mentioned different strategies that you can use for this pattern. You must use the most appropriate strategy and make informed decisions. 

The losses can be avoided and reduced by incorporating and adopting the right strategy. The small guide aimed at helping you understand the popular candlestick pattern. 

We hope this guide helped you understand the abandoned baby candlestick pattern and how you can trade using it. To get started with one of the top online brokers, then the below table compares all their features for you to make an educated decision on which broker to choose.