In this tutorial, we'll explore the Bearish Abandoned Baby pattern, a prominent Japanese candlestick formation. We'll examine how this pattern signals a price reversal after an upward trend and discuss a trading strategy based on its identification and confirmation.

• What is the Bearish Abandoned Baby Pattern?
• Key Points of the Bearish Abandoned Baby Candlestick Pattern
• Identifying a Bearish Abandoned Baby Pattern
• What the Bearish Abandoned Baby Pattern Indicates to Traders
• Limitations of Using the Bearish Abandoned Baby Pattern
• Effective Trading Tactics for Bearish Abandoned Baby Patterns

A bearish abandoned baby is a candlestick pattern made up of three candles: one with increasing prices, one with holding prices, and one with decreasing prices. This pattern, according to technical experts, indicates at least a short-term reversal in a currently upward rising price.

The pattern's psychology starts with an upward price trend. The bulls have taken control of the market, as seen by the first green candle line in the pattern. The price rises the next day, but then falls and forms a Doji candle. The bulls and bears are battling for market domination. The third day reveals the winner: the bears. After the price opens lower, a red candle appears, suggesting the start of a downward price trend.

• This pattern consists of a powerful up candle, a doji candle, and then a strong bearish candle.
• A bearish abandoned baby is a somewhat uncommon pattern that has a good track record of predicting a short-term downward trend.
• The bullish abandoned baby is a bullish version of the pattern that is similarly unusual and has a solid track record for predicting an upward trend reversal.

Traders are looking for bearish abandoned baby patterns, which might signal the end of an upswing. Because price changes must fit exact requirements in order to generate the pattern, it is unusual.

To determine that the candlestick pattern is "Bearish abandoned baby," consider the following requirements.

• The market is on the rise.
• The first candle is a big upward candlestick that represents a rising trend.
• The second candle is a doji candle (open equals close) that open above the close of the previous candle.
• The third candle is formed when a large red candle opens underneath the second.

In the rising trend, the attitude on the market is upbeat. An upward candle is created on the second day, however the price growth comes to a halt at this point. The second day has a small trading range, with the starting and closing prices being close to each other (Doji). The tiredness of the trend is shown in this candle, which is reinforced by the red candle opening with a downward orientation on the third day.

After the third candle appears, traders initiate a long position since a bearish abandoned baby implies a fading uptrend. Traders establish a stop-loss limit immediately below the down shadow of the Doji Star to avoid losses due to any unexpected changes. Some traders will try to restrict their risk by setting their stop-loss order below the endpoint of the third candle's downward shadow. It makes sense since the market will continue to collapse, and this might be a good time to sell.

This pattern emerges when the pressures of commodity selling shift to commodity purchasing. Psychological and fundamental factors are causing traders to predict a trend shift.

• Wait for the price to close lower a day after the abandoned baby completes to discover a reversal. In a bull market, this strategy works 91% of the time.
• Only downward breakouts apply because the price trend is up and we're searching for reversals.