Bullish Belt Hold is an example of a candlestick pattern that follows three consecutive lower lows. A big bullish candlestick opens with a gap and making a lower low before closing within the range.
The bullish candlestick should be small on the upper and not have any wick on its lower side.
It is a trend reverse candlestick pattern which transforms a bearish price trend into an upward trend. In stocks and indices, the belt-hold pattern is very common. High volatility means that there is very little chance of the belt-hold pattern in forex trading.
How can I recognize a bullish-belt hold pattern?
These steps will allow you to determine the belt hold candlestick pattern in the price chart.
- Find three bearish candlesticks making lower Lows consecutively on the chart
- After three lows, a bullish candlestick opens lower than the previous candlestick and then closes within its range.
- A bullish candlestick needs to have a little shadow on the upper side, and no shadow on the lower side. It should be wider than the range of previous three candlesticks. It should not be a tiny bullish candlestick
These three parameters are necessary to determine if there is a belt held candlestick on the chart. The pattern is one candlestick. However, the other three candlesticks can be used as conditions to maximize trading performance.
Bullish Belt Hold: Information Table
|Number of Candlesticks||4|
|Prediction||Bullish trend reversal|
|Prior Trend||Bearish trend|
|Counter Pattern||Bearish Belt Hold|
What can bullish belt hold candlestick reveal to traders?
It is a good idea to understand the reasons behind a candlestick pattern before you trade it. The reason will help you make the right decision when trading stocks and forex.
The chart shows three bearish candlesticks. This indicates a market that is in a bearish trend. This is because sellers have used their full potential by opening a new candlestick that has a gap at the low of the previous candlestick.
The market was already in an oversold position, but a bearish gap confirmed that sellers had used all their power. The market will now be flooded with buyers.
The big bullish candlestick that engulfs the gap and closes within the range of its previous candlestick indicates that buyers now control the market and have overthrown sellers. This indicates that a bullish trend is about to begin.
To identify a bearish trend reverser, you should use a bullish candlestick pattern with a bullish hold candlestick pattern.
How to trade the bullish belt pattern?
For best results, it is recommended that you trade candlestick patterns together with technical analysis tools. This is the Bullish Belt Hold Trading Strategy. This strategy is a combination of two confluences.
- Support zone
- Bullish belt holds pattern
Open a Buy position
The price chart should show a strong support area. The support zone is likely to cause a trend reversal.
To increase the likelihood of a trend reversal, you should look for a bullish-belt hold candlestick pattern in the support zone.
Open a buy order immediately after the formation of the candlestick patterns.
The support zone is the safe stop-loss limit. Stop-loss of a buy order should be placed just a few pips lower than the support zone.
When an order reaches a 1:1 risk/reward ratio, close the 75% of total trade. Keep the trade open until you reach a 1:2 risk-reward ratio.
Pro tip: Use bullish belt holds candlestick patterns with technical chart patterns to increase risk-reward ratios.
Belt hold is a simple chart pattern, but there are very few chances that it will occur in major currency pairs due to high volatility and small gaps on the chart. This pattern is highly probable for both stocks and indices traders.
New traders are advised not to trade candlestick patterns without the confluence and technical indicators. A candlestick pattern can only work in trend, but it won’t work in range.
To avoid trading false patterns, make sure you backtest the candlestick pattern.