Falling Window Candlestick Pattern Review

The source offers a review of the Falling Window candlestick pattern for trading.

 Hello, dear readers.

Traders in financial markets are in pursuit of their dreams. Financial markets are the very path to success and financial freedom. In order to succeed here, we need to know the trading rules, and technical analysis is the first thing that comes to mind. The formation, reasons, and signals of Japanese candlestick patterns in technical analysis are our first step towards understanding. One of these patterns is the "Falling Window" candlestick pattern that we will talk about today.

An image of bearish Falling Window candlestick pattern.
Falling Window Candlesticks


  • Topic: Falling Window
  • Type: bearish
  • Trend direction: continuation
  • Opposite pattern: Rising Window


What is the "Falling window" candlestick pattern?

The Falling Window is a bearish candlestick pattern consisting of two candles. It appears within strong downtrends, and when seen on a price chart, it generally signals a continuation of the downward trend. This pattern suggests that a bear market could persist and that the downward trend is likely to continue. The falling window pattern can indicate a sudden weakness or selling tension in the market, and increases the probability of the downtrend continuing in a bear market.


The Structure of the Falling Window candlestick pattern

The Falling Window candlestick pattern consists of two consecutive candles, with a downward gap between them. This pattern occurs when bears are dominant in the market over bulls. Dominant bears can continuously push prices downward. The most noticeable element in the pattern structure is the gap between two candles. This gap indicates increased selling intensity and a rapid drop in price below the closing price of the previous candle. Here is the structure of the "Falling Window" candlestick pattern:

Two bearish candles: The main candles that form the pattern are two consecutive red candles. Both candles usually have long bodies and are downward.

Downward gap: There is a gap between the two bearish candles. This gap is between the lowest level of the first red candle and the highest level of the second red candle. This downward gap indicates a sudden drop, often occurring due to news or market sensitivity. This gap creates the concept of a "window," which gives the pattern its name.

The Falling Window pattern is usually defined by the price opening at a level lower than the previous level and the presence of a gap between them. This structure indicates that the price came with a sudden drop and suggests that the bearish trend may continue.


Trading with Falling Window candlestick pattern

The Falling Window candlestick pattern mainly occurs when the downward trend strengthens. Sellers in the market gain an advantageous position, and the increased risk of price decline can trigger selling. When an asset is already in a downtrend and the Falling Window pattern forms, it is considered a technical analysis rule that suggests the asset's price could further decrease, indicating a continuation of the downward trend. However, when trading in financial markets like Forex, it's important to avoid rushing and instead approach with patience, considering other technical and fundamental factors.

Sell (Short): Selling can be done below the closing price of the second bearish candle.

Stop Loss: The stop loss order can be placed above the high of the first bearish candlestick or above the gap.

Take Profit: Targets are generally determined based on the asset's price movement and the risk-reward ratio of the trading strategy.

Below, we provide a detailed trading example that illustrates how the Falling Window pattern manifested in the American Airlines Group stock price. This example demonstrates how the pattern signaled the continuation of a downtrend, highlighting the impact of the pattern on price movement and trading strategies.

Chart showing the Falling Window pattern in American Airlines Group stock, indicating a continued downtrend.
Falling Window reflects downtrend continuation in AAL stock.

Kindly be aware that: Remember, the reliability of candlestick patterns is limited, and they are not sufficient on their own. None of the candlestick patterns guarantee definite success. The Falling Window pattern is not a standalone trading signal and should be used in conjunction with other technical indicators and formations. Always pay attention to risk management. May your trades be profitable!

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