Stock Analysis
Apr. 24, 202413 min read

Abandoned Baby Candlestick Trading Guide

Tim BohenAvatar
Written by Tim Bohen

The Abandoned Baby Candlestick is a rare but powerful pattern in technical analysis that signals a potential trend reversal in the market. This pattern is highly regarded by traders for its reliability and can appear in both bullish and bearish contexts. Understanding this pattern can give you a significant edge in trading stocks, crypto, or any other market.

You should read this article because it offers a comprehensive guide on the Abandoned Baby Candlestick pattern, a rare but highly reliable indicator for trend reversals in various markets, including stocks and crypto.

I’ll answer the following questions:

  • What is the Abandoned Baby Candlestick?
  • How do you identify the Abandoned Baby Candlestick pattern?
  • What is the bullish Abandoned Baby Candlestick pattern?
  • What is the bearish Abandoned Baby Candlestick pattern?
  • What are the differences between the bullish Abandoned Baby pattern and the Morning Star pattern?
  • What are the differences between the bearish Abandoned Baby pattern and the Evening Star pattern?
  • How do you trade the Abandoned Baby Candlestick pattern?
  • What are the risks and limitations of using the Abandoned Baby as a trading signal?

Let’s get to the content!

Table of Contents

What Is the Abandoned Baby Candlestick?

The Abandoned Baby Candlestick is a unique formation in the world of trades and technical analysis. This pattern is a reversal signal that can indicate a change in price trends. It’s composed of three candlesticks, each with its own wick and shadow, separated by candle gaps. The opening and closing prices of these candles provide traders with a lot of information. This pattern has a high success rate, making it a valuable tool for those looking to maximize their investment and profits.

Abandoned Baby Definition and Structure

The Abandoned Baby Candlestick pattern consists of three candles: one long body followed by a doji candle and then another long body moving in the opposite direction. The doji candle is the “baby” that gets abandoned. The first and third candles have bodies that don’t overlap, creating gaps or “price gaps” on both sides of the doji. This pattern is a strong indicator in technical analysis and is used by traders to predict trend reversals.

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Identifying the Abandoned Baby Candlestick Pattern

Spotting this pattern involves keen observation of candlestick charts. Look for a long candle followed by a doji candle with gaps on either side. The third candle should be a strong move in the opposite direction, confirming the pattern. Volume is crucial here; a spike in trading volume can provide additional confirmation.

Why Is the Abandoned Baby Candlestick Pattern Named So?

The term “Abandoned Baby” is more than just a catchy name. It vividly describes the pattern: a single doji candle isolated from the rest, much like an abandoned baby. The name helps traders remember the pattern, making it easier to identify in the heat of trading.

Understanding the Abandoned Baby Pattern: Bullish and Bearish

When it comes to the Abandoned Baby pattern, there are two sides of the line: bullish and bearish. The appearance of this pattern can signal a bullish or bearish reversal, depending on the preceding trend and the formation of the candles. The bullish pattern often occurs at the end of a downtrend, signaling that bulls are taking over and exerting upward pressure. On the flip side, the bearish pattern suggests that bears are in control, pushing resistance levels down and indicating a potential decline in prices.

If you’re keen on mastering various chart patterns, there’s a wealth of knowledge out there. The Abandoned Baby pattern is just one of many that traders use to navigate the market. There are other patterns, like the 3 White Soldiers, that can also provide valuable insights into market trends. The more you know, the better your trading strategy will be. Want to expand your chart pattern knowledge? Check out this guide on the 3 White Soldiers trading strategy.

What Is the Bullish Abandoned Candlestick Pattern?

In a downtrend, a Bullish Abandoned Baby pattern can signal a reversal to an uptrend. The first candle is bearish, followed by a doji that opens with a gap down. The third candle is bullish and opens with a gap up. This is a sign that bulls are taking control and the price is likely to rise.

What Is the Bearish Abandoned Candlestick Pattern?

Conversely, in an uptrend, a Bearish Abandoned Baby indicates a potential downtrend. The first candle is bullish, followed by a doji with a gap up. The third candle is bearish with a gap down, signaling that bears or sellers are taking over.

The Difference Between Bullish Abandoned Baby Pattern and Morning Star Pattern

While both patterns signal a bullish reversal, the key difference lies in the gaps. The Abandoned Baby has gaps on both sides of the doji, while the Morning Star does not necessarily have these gaps.

The Difference Between Bearish Abandoned Baby Pattern and Evening Star Pattern

Similarly, both indicate a bearish reversal but the Abandoned Baby pattern has gaps around the doji, making it a stronger signal compared to the Evening Star.

The Psychology Behind the Abandoned Baby Pattern

The Abandoned Baby pattern reflects market psychology of indecision followed by a strong decision. The doji represents indecision among traders. The following candle shows a strong move in the opposite direction, indicating that one side (bulls or bears) has taken control.

How To Trade the Abandoned Baby Candlestick Pattern

Trading the Abandoned Baby pattern involves keen observation and quick action. The pattern’s performance can be confirmed through various indicators like volume, resistance, and support levels. Tips and advice on how to trade this pattern can be found in various resources, including articles, youtube links, and other online points of information. The goal is to enter or exit a trade at the right moment to maximize profits while minimizing risk.

While the Abandoned Baby is a strong indicator, it’s not the only pattern you can trade. Bear traps, for example, can offer a different angle on market movements, especially when you’re looking to short a stock. Understanding bear traps can add another layer to your trading strategy. Interested in diving deeper? Here’s a comprehensive guide on bear traps.

Trading Strategies for the Bearish Abandoned Baby Pattern

When you spot a Bearish Abandoned Baby, consider taking a short position. However, always wait for confirmation, like a drop in price or increased volume, before making your trade. Use tools like moving averages and other indicators to validate your decision.

Risk Management When Trading the Abandoned Baby Pattern

Risk management is crucial when trading any pattern, and the Abandoned Baby is no exception. Setting appropriate stop-loss points based on the pattern’s formation can help protect your investment. It’s also essential to consider the reasons behind the pattern’s appearance, as external factors can influence its reliability. Always remember, trading involves risks, and it’s your right to manage them effectively.

Stop-Loss Orders and Profit Targets for the Abandoned Baby Pattern

Setting a stop-loss is crucial when trading this pattern. Place your stop-loss just above or below the doji for bullish or bearish patterns, respectively. As for profit targets, aim for a level that’s two or three times the risk.

Money Management When Trading the Abandoned Baby Pattern

Allocate only a fraction of your trading capital to any single trade. Diversification and position sizing are key elements of effective risk management.

Real-World Examples of The Abandoned Baby Pattern

Real-world examples of the Abandoned Baby pattern are abundant, especially if you know where to look. These cases can serve as practical lessons for traders, offering insights into the pattern’s performance across different markets. Whether you’re trading stocks or crypto, keeping an eye out for this pattern can offer a lot of value. Many traders share their experiences with this pattern on YouTube and other platforms, providing additional points of view.

The Abandoned Baby pattern is just one of many chart patterns you’ll encounter in the markets. If you’re looking to diversify your pattern recognition skills, there are platforms that offer a plethora of chart patterns to study. The more patterns you can recognize, the more versatile you’ll be in any trading scenario. Ready to explore more chart patterns? Take a look at this StocksToTrade article on various chart patterns.

Chart Example of Abandoned Baby Pattern

You can find numerous examples of this pattern on daily and intraday charts across various markets, from stocks to crypto. These real-world examples serve as excellent resources for understanding the pattern’s effectiveness.

Example of Abandoned Baby Candlestick Pattern in Real Life

In the stock market, let’s say a tech stock shows a Bearish Abandoned Baby pattern. If the pattern is confirmed, it’s likely that the stock will experience a sell-off.

Limitations and Considerations of the Abandoned Baby Pattern

While the Abandoned Baby pattern is powerful, it’s not without its limitations. For one, it’s a rare pattern, so you won’t find it occurring as frequently as others. Also, it’s crucial to consider that while the pattern has a high success rate, it’s not foolproof. Always corroborate the pattern’s signals with other indicators and information. This article included this title and topic to ensure you’re aware of both the potential and the pitfalls of this intriguing pattern.

Risks and Limitations of Using the Abandoned Baby as a Trading Signal

No pattern is foolproof. Always consider other factors like market news and economic indicators. The Abandoned Baby pattern is just one tool in a trader’s toolbox.

Key Takeaways

Understanding the Abandoned Baby pattern can provide valuable insights into market trends and potential reversals. However, always use it in conjunction with other tools and indicators for the most reliable results.

Before you even think about becoming profitable, you’ll need to build a solid foundation. That’s what I help my students do every day — scanning the market, outlining trading plans, and answering any questions that come up.

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Have you traded abandoned baby candlestick patterns? Let me know in the comments!

Frequently Asked Questions

Is the Abandoned Baby Pattern Reliable?

Yes, it’s considered one of the more reliable candlestick patterns, but it’s not foolproof. Always use it as part of a broader trading strategy.

How Do I Identify a Bullish/Bearish Abandoned Baby Candlestick Pattern?

Look for a long candle followed by a doji with gaps on either side, and then another long candle moving in the opposite direction. Confirm with volume and other indicators.

What Time Frame Is Best for The Bullish Abandoned Baby Candlestick Pattern?

This pattern can appear in various time frames but is generally more reliable in longer time frames like daily charts.

How Do Wicks and Shadows Interact With Each Other?

Wicks and shadows are elements of a candlestick that provide information about the price range during a particular time frame. In the context of the Abandoned Baby pattern, these components help to define the “island reversal pattern,” indicating a potential shift in market sentiment.

What Rights Do Traders Have When Encountering an Abandoned Baby Pattern?

When traders identify an Abandoned Baby pattern, they don’t have inherent “rights” but rather opportunities to act on this bullish or bearish signal. The pattern often signals a return to a specific trend and provides insights for entering or exiting trades.

How Many Seconds Does It Typically Take for the Abandoned Baby Pattern to Close?

The time it takes for an Abandoned Baby pattern to close is dependent on the time frame being used. The “second” is the smallest unit of time used in trading, and it’s crucial to consider when you are dealing with short-term trading strategies.