How to Make Money Trading the Abandoned Baby Pattern in Olymp Trade

What is the Abandoned Baby Pattern?

The Abandoned Baby Pattern is a trend reversal pattern that occurs at the end of both Uptrends and Downtrends to signal the reversal of such trends into the opposite.

When it occurs at the end of an Uptrend, it is called the Abandoned Baby top and it signifies the reversal of such uptrend into a downtrend.

The Abandoned Baby Pattern occurring at the end of a Downtrend is called the Abandoned Baby bottom and signifies the reversal of such downtrend into an Uptrend.

An Abandoned Baby Pattern is made up of three candlesticks.

The first candlestick is long and in the direction of the prevailing trend and the second is very short bodied or a Doji and gaps so significantly away from the first candlestick. The third candlestick also gaps significantly away from the second. It is long and in the opposite direction to the prevailing trend – that is in the direction of the anticipated reversal.

An Abandoned Baby top occurring at the end of an uptrend is made up of three candlesticks as we said.

The first candlestick is long and bullish while the second is a very short bodied candlestick or a Doji and gaps so high that its low price is higher above the high price of the first candlestick.

The third candlestick gaps so low that its high price is also lower below the low price of the second candle, it is long and bearish.

On the flip side,

An Abandoned Baby bottom occurring at the end of a downtrend is made up of three candlesticks.

The first is long and bearish while the second is very short bodied or a Doji and gaps so low that its high price is below the low price of the first candlestick. The third candlestick gaps so high that its low price is also higher above the high price of the second. The third candle is long and bullish.

You must have noted that the Abandoned Baby Patterns look almost like the Evening Star at the end of an Uptrend and the Morning Star at the end of a Downtrend.

The difference is in the gapping of the second candlestick.

For the Morning and Evening Star Patterns, the gapping is such that the shadows of the second candlesticks overlap with the shadows and bodies of the first and third candlesticks of the pattern.

However, for the Abandoned Baby Pattern, there is no overlap between the second candlesticks’ shadows and the shadows and bodies of the first and third candlesticks of the pattern.

One amazing thing with the Abandoned Baby Candlestick Pattern is that it is self-confirmatory and may not need the use of technical indicators like other patterns.

You can actually trade it right away or choose to apply technical indicators in case you want to confirm further.

Fixed Time Traders should set the trade duration to 3 or more times that of the candlestick timeframe. This is for better results and free movement of the price.

Trading the Abandoned Baby Pattern on Olymp Trade.

Now that you know what the Abandoned Baby Pattern looks like, you can then use it to make money on Olymp Trade. The ‘How’ is what we shall handle here.

Trade using the Abandoned Baby Pattern on Olymp Trade in the following simple and quick steps;

1. Establish Trend Direction.
2. Identify the Abandoned Baby Pattern.
3. Enter Buy or Sell Position.
4. Adjust your Stop Loss.
5. Adjust your Take Profit.

Details of each step follow.

1. Establishing the Trend Direction.

An Uptrend is where the price keeps moving up posting both higher highs and lows. A Downtrend, however, is where the price keeps moving down forming both lower highs and lows.

You need to establish this to know whether to expect an Abandoned Baby top at the end of an Uptrend or an Abandoned Baby bottom at the end of a Downtrend.

2. Identifying the Abandoned Baby Pattern.

An Abandoned Baby top occurring at the end of an uptrend is made up of three candlesticks as we said.

The first candlestick is long and bullish while the second is a very short bodied candlestick or a Doji and gaps so high that its low price is higher above the high price of the first candlestick.

The third candlestick gaps so low that its high price is also lower below the low price of the second. It is long and bearish.

Conversely, an Abandoned Baby bottom occurring at the end of a downtrend is made up of three candlesticks.

The first is long and bearish while the second is very short bodied or a Doji and gaps so low that its high price is below the low price of the first candlestick.

The third candlestick gaps so high that its low price is also higher above the high price of the second. It is long and bullish.

3. Entering Buy or Sell Position.

An Abandoned Baby top is enough for you to enter a Sell Position while an Abandoned Baby bottom warrants a Buy position. You can confirm overbought or oversold conditions using a tool like the RSI though it may not be necessary as we said.

4. Adjusting your Stop Loss.

The ideal position for your Stop Loss is just above the high price of the second candlestick of the Abandoned Baby top for a Sell position.

For a Buy position, place it just below the low price of the second candlestick of the Abandoned Baby bottom.

5. Adjusting your Take Profit.

We do not have a prior measurement for estimating how long the new trend will take. You can, therefore, identify a major support area for your sell position and a major resistance area for your Buy position from which you will take profits.

To be certain, identify the closest support or resistance zones to estimate the minimum profit you can take, of course, while being objective that the price has the potential to move past those levels.

Proper risk to reward ratio and money management is also key in determining when to Take Profit. Employ them appropriately.