The Abandoned Baby is a reversal candlestick pattern that shows a shift in momentum from the bullish to bearish and vice versa. The pattern consists of three candles.
What is the Abandoned Baby Candlestick Pattern?
The first candle of the Abandoned Baby determines the direction of the trend.
The next candle is the Doji that gaps the first candle in the direction of the trend.
The last candle appears in the opposite direction of the first candle, and gaps in the other direction of the second candle.
The bodies and wicks of the candles don’t overlap with each other.
The pattern has two variations; Bullish Abandoned Baby and Bearish Abandoned Baby.
Bullish Abandoned Baby
The Bullish Abandoned Baby is a three-candle pattern that appears in a downtrend. The first candle of the pattern is a down candle, followed by a gapped Doji, and a gapped bullish candle. The pattern signals the initiation of a potential uptrend.
Bearish Abandoned Baby
The Bearish Abandoned baby consists of three candles and emerges in an uptrend. Its first candle is an up candle, followed by a gapped Doji, and a gapped bearish candle. The pattern signifies the inception of a possible downtrend.
Although there is a slight variation in the bullish and bearish pattern, yet what’s important is the movement of the price.
Traders identify both bullish and bearish Abandoned Baby from three specifications; first, a strong trend, second, proper arrangement of the pattern, and third, the gaps between the candles.
Both the bullish and the bearish Abandoned Baby resemble the Morning and the Evening Star Candlestick Patterns. The difference between the patterns occurs due to the presence of a Doji candlestick. Morning and Evening Stars don’t require the second candle to be a Doji.
Besides this, the Abandoned Baby looks similar to the Island Reversal pattern, but with a single candle.
Due to the structure of the Abandoned Baby, it infrequently surfaces on the charts.
How to use the Abandoned Baby Candlestick Pattern?
One of the benefits of Abandoned Baby is it can give clear entry and exit signals. Traders can apply Bullish Abandoned Baby for going long and Bearish Abandoned Baby for going short.
For the bullish pattern, traders would usually enter above the third candle. If the price continues to move higher, traders can use it as a buying opportunity. Traders could place a stop-loss below the lower wick of the Doji (second) candle. The conservative trader may place a stop-loss below the third candle.
For the bearish pattern, traders enter below the third candle. If the price continues to move downwards, it’s a sell signal. A stop-loss is placed above the upper wick of the Doji candle. However, a conservative trader may place a stop-loss above the third candle.
Although the Abandoned Baby defines a price reversal, it doesn’t tell about the profit-targets. Therefore, other indicators like Fibonacci Retracements could be used.
Abandoned Baby Candlestick Pattern trading strategy
Due to the nature of the pattern, the Abandoned Baby scarcely appears on the charts. However, when it surfaces, it can be used as part of an overall forex trading strategy as an additional filter.
You can spot these candlestick patterns on long and short term timeframes. They can appear on forex currency pairs, stocks, indices, cryptocurrencies, commodities, metals, energies, gold, silver and more.
Abandoned Baby Candlestick Pattern buy strategy
- Look for the pattern in a downtrend.
- Wait for the price bar to go bullish before entering.
- Enter after the formation of the pattern.
- Place a stop-loss near the low of the second candle.
- Exit the trade on high.
Abandoned Baby Candlestick Pattern sell strategy
- Locate the pattern in an uptrend.
- Wait for the price bar to go bearish before entering.
- Enter after the formation of the pattern.
- Place a stop-loss near the recent high of the Doji.
- Exit the trade on low.
Abandoned Baby Candlestick Pattern conclusion
The Abandoned Baby Candlestick Pattern can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy. The Abandoned Baby Candlestick Pattern can help to spot a trend reversals as part of a forex reversal strategy. But, identifying the pattern on a chart is often challenging.
I would prefer to use the majority of candlestick patterns such as the Abandoned Baby Candlestick Pattern on the 1-hour charts and above. I tend to find that these charts contain less market noise than the lower time frames and thus give more reliable signals for my forex trading strategies. This also means that I spend less time staring at charts and can also set alert notifications to let me know when price has reached certain levels, candlestick pattern has been formed or a particular indicator value has been reached.
The Abandoned Baby Candlestick Pattern is just one method of market analysis amongst thousands. I would not build a trading system alone, but rather combine with other technical indicators such as moving averages, Parabolic SAR, Stochastic Oscillator, RSI, ADX and price action analysis.
Of course, every trading system will generate false signals which is why money management is so important. I would personally be implementing sensible money management and only take traders that give me a favorable risk to reward ratio, ideally of at least 1:3. This means that one losing trade does not wipe out consecutive winners.
The methods of implementing the Abandoned Baby Candlestick Pattern into a trading strategy that are outlined within this article are just ideas. I would always ensure that I have good money management, trading discipline and a trading plan when using any forex strategy.
Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all entries. You should trade forex in a way that suits your own individual style, needs and goals.
If you would like to practice trading with the Abandoned Baby Candlestick Pattern, you can open an account with a forex broker and download a trading platform. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.