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Battle between bears and bulls results in island reversal. A long-term or medium-term reversal does not necessarily indicate reversal pattern, so traders must exit the position after making the swing move. Comparing a lower high and a higher low to the day helps identify hook reversals. An Emini trader can gain insight in price action at one glance by taking a look at candlestick patterns. Although traders can learn what the Emini futures market is thinking from basic candlestick patterns, but often false signals are generated by them because of how common they are. That is why traders should familiarize themselves with some highly advanced candlestick patterns that are more reliable, while exploring ways to combine them with gaps so that profitable trading strategies can be produced. Island Reversal Patterns Island reversals are short-term strong trend reversal indicators. A gap between a reversal candlestick with two candles on both sides of it helps to identify them. Whenever this pattern is being used, the following important things should be considered: Entry: To look for an island reversal, traders must look for a battle between bears and bulls and for indecision. The best way to characterize this sort of a scenario is with a long-ended Doji that now has high volume taking place after a long previous trend. A potential reversal pattern cannot be confirmed without looking for some important elements. Exit: In most cases, a sharp reversal will be seen when this pattern is used. A long-term or medium-term reversal is not necessarily indicated by this reversal pattern, so exiting the position after making the swing move is recommended. If the gap ever gets filled by the next candle, then it would invalidate the reversal pattern and that is when a trader should exit with caution. Island reversals can even take place within a reversal pattern with multiple candles or in clusters, like an engulfing instead of one candle reversal. It is easier to spot clusters, but the reversals that occur tend to be weaker. Hook Reversal Patterns Hook reversals are medium-term to short-term reversal patterns. Comparing a lower high and a higher low to the day before can help to identify them. Whenever this pattern is being used, the following important things should be kept in mind: Entry: If there is an uptrend before the pattern takes place, the open and the prior high must be near each other, and the low and the prior low should be near each other. However, when the pattern takes place after a downtrend, then the opposite happens. On this candle pattern, just like the island reversal pattern, traders are supposed to keep their eyes out for high volume. Finally, the reliability of the reversal pattern depends on the prior trend, so if the prior trend is strong, the reversal pattern will be more reliable. Exit: In most cases, a sharp reversal will be seen when this pattern is used. If a strong continuation can be seen of the previous trend in the next candle, then this would invalidate the reversal pattern, in which case a cautious but quick exit should be made. Conclusion It should now be obvious how candlestick patterns that are advanced can be used by traders in order to find reversals. Although it is possible for an Emini trader to understand price action by using many other candlestick patterns, but the above were the most reliable ones for this purpose. Author of this article enjoys listening to the CFRN Emini Futures Live Market Commentary each day and also watching the CFRN Professional Emini Traders place live trades in their Live Emini Trading Room.
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