The Dark Cloud Cover pattern is used by many traders to spot reversals and achieve favorable risk to reward ratios. Learn how to trade this pattern
The Dark Cloud Cover pattern is used by many traders to spot reversals in the market and achieve favorable risk to reward ratios. It is fairly easy to spot, however, traders need to view the formation of the Dark Cloud Cover candlestick in conjunction with other crucial factors and avoid simply trading as soon as the pattern appears.Advantages and limitations
Stocks will gap up, with the red candle opening above the previous green candle however, this is very rarely found in forex candlesticks as these candles will mostly open at the same level as the prior candle’s close, or very close to it.
Entry levels, targets and stops can be easily identified when taking a look at the zoomed in chart below. The entry can be placed at the open of the next candle, after the Dark Cloud Cover pattern has formed.can be placed above the recent swing high and the initial target level can be set at key levels or recent areas of support/resistance. It is worth noting that because the trade is potentially the starting point of an extended move down, traders can set multiple target levels.
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