While going through the chart I have identified this as Bullish Flag with a breakout of a green candle. After the green candle the bearish candle formed and it became a completely bearish reversal pattern (Dark cloud).
Is my drawing correct? if yes, how can we handle this while we already entered into the trade?
Bullish Flag looks good even though it failed. You could as treat it as a wedge or triangle, still bullish. None of these things is 100% reliable.
But for the bullish/bearish two-candlestick pattern to be a true Dark Cloud Cover, the bearish candle’s Open would have to be above the Close of the bullish candle, while its Close would have to be below the mid-point of the bullish body (not the full candle range). Of course, its only marginally possible for an intra-day candle or any forex candle to print an opening gap between the close of one bar and the Open of the next - these are not “real” gaps. This doesn’t mean that things like Engulfing candles are impossible in forex, just don’t expect them to work anything like as well as people say they should.
You could treat the candle formation as an Inside Bar. This signifies hesitation and id can sometimes be followed by dramatic break-out (BUT in either direction). Or you could treat it as a Bearish Harami, though that is a rubbish unreliable signal.
At the close of the bearish bar, its reasonable to assume that there is going to be a break-out. However, the bullish break-out from the bull flag has stalled. There is no bearish Dar Cloud Dover. There is an Inside Bar but that could point either way.
Actually the IB does point to a possible solution - set bracket orders - buy above and sell below. Either enter manually on the breach or by pre-set order on the breach or manually on the first close above or below. All would have worked here.
Thanks @tommor you’re right it’s Bearish harami. Can you share your view on this chart (1st flag) too? I have started learning candlesticks and came to chart patterns but when I’m backtesting some are failed.
Obviously, as you said they’re not 100% reliable. But, something hit my mind that my analysis is wrong.
Truthfully I just look for trends. If there’s a consistent uptrend and the base currency is significantly more bullish than the counter across the main charts I aim to buy when a lower high is breached. If there isn’t a trend I look for an inside bar so I can bracket it and catch a break-out, hopefully into an uptrend or downtrend.
