What is the Hikkake Trade Set-up?
The Hikkake Trade set-up is a candlestick pattern traded in a way that is the complete opposite of how the Inside bar trade set-up is traded.
Do you remember the inside bar strategy?
I bet you do remember the inside bar strategy from a previous post.
It involves identifying the inside bar and trading the breakout above the high or below the low of the inside bar.
But what is the inside bar?
The Inside Bar is any candlestick whose whole dimension is contained within the dimension of the previous candlestick. The trade set-up entails a mother candlestick, then the inside bar.
You trade the inside bar strategy by first identifying the mother candlestick, then a next candlestick which is wholly engulfed by that mother candlestick.
What you do next is to mark the high and low of that candlestick engulfed by the previous one.
You can then trade up if the price breaks above the high of the inside bar or down if it breaks below the low of the inside bar.
It’s that simple trading the inside bar.
Read more about the Inside bar strategy from the post ‘How to Make Money Trading the Inside Bar Strategy’.
Back to Hikkake Trade Set-up.
So next comes the Hikkake trade set-up.
We mentioned that the Hikkake trade set-up is traded in a completely opposite manner to how the inside bar is traded.
So look at how the inside bar is traded from the above description and more on the highlighted post.
Then you will better understand how the Hikkake trade set-up is traded in the discussion which follows.
What all that means is that the Hikkake trade set-up is used to trap or trick the market after a failed inside bar breakout.
Ideally, the market will expect to kick you out if you trade the inside bar correctly and the breakout turns out to be a fake-out.
However, with the Hikkake trade set-up, you trap or trick the market to still profit even if the inside bar breakout is fake.
Tricking the Market with the Hikkake Trade Set-Up in Olymp Trade.
Now, what about this tricking thing?
It’s about trapping the market where you would have been knocked out after a failed inside bar breakout.
So let us see the dynamics of how you can actually trick the market to bag huge profits in Olymp Trade.
This is following a failed inside bar breakout, using the Hikkake trade set-up.
Here are the simple steps to follow in trapping the market with the Hikkake trade set-up in Olymp Trade:
Identify the Inside Bar.
The Inside bar is at the core of the Hikkake trade set-up.
This is because the Hikkake trade set-up preys on failed inside bar breakouts. This means the inside bar must be a party to the Hikkake trade set-up.
How do you identify the inside bar?
By first considering the candlestick right before it, then looking at that current candlestick.
To qualify to be an inside bar, the current candlestick must be fully engulfed by the one immediately before it.
Meaning, the whole body and the upper and lower wicks of that current candlestick must be contained within the dimensions of the previous candlestick.
If you spot an ideal inside bar as described, then you can proceed to the next step.
If not, then exercise patience and look further for better set-ups, without rushing into improperly developed set-ups.
Draw a Range.
You remember you identified a mother candlestick then an inside bar, right?
It is the inside bar that is of interest in drawing the range here.
How do you draw a range?
Locate the highest high of the inside bar and draw a horizontal line at that level. Locate also, the lowest low of the inside bar and draw another horizontal line at that level.
That way, you will have drawn a range.
A range is a constricted channel of price movement involving one or more candlesticks.
Proceed to the next step after drawing the range.
Wait for Inside Bar Breakout.
A breakout is a price movement outside an identified price range.
In other posts, we mentioned that a breakout is usually preceded by a tight price range and the range here, is represented by the high and low levels of the inside bar.
- Typical Upward Breakout: Wait for the price to move upwards above the highest high of the inside bar and close above that level showing a bullish inside bar breakout.
- Typical Downward Breakout: The price should move downwards below the lowest low of the inside bar and close below that level showing a bearish inside bar breakout.
- Technical Upward breakout: The next bar after the inside bar has a higher high and a higher low than the inside bar pointing towards a bullish breakout of the inside bar.
- Technical Downward Breakout: The next bar after the inside bar has a lower high and a lower low than the inside bar signifying a bearish breakout of the inside bar.
Place a Buy or Sell Stop Pending Order.
When trading the inside bar strategy, you realize that this step comes before waiting for a breakout. But because we are dealing with the Hikkake trade set-up, that is why it’s here.
So where do you place the Buy Stop Pending Order? And where and when do you resort to a Sell Stop Pending Order? We are just about to find out all of these.
Typical or Technical Upward Breakout: Place a Sell Stop Pending Order at the Low of the Inside Bar.
Typical or Technical Downward Breakout: Place a Buy Stop Pending Order at the High of the Inside Bar.
The reason we are placing a Sell Stop Pending order following an upward inside bar breakout is to profit from a failed upward inside bar breakout.
A failed inside bar upward breakout means that instead of continuing upwards, the price will reverse downwards shortly after.
In that case, a sell trade is meant to profit you big time.
In the same manner, we are placing a Buy Stop Pending Order following a downward inside bar breakout to profit from a failed downward bar breakout.
A failed inside bar downward breakout means that instead of rallying downwards, the price will reverse upwards shortly after.
In that regard, a buy trade is meant to profit you significantly.
Do you see what we’ve just done? We’ve trapped or tricked the market?
Where you’d have suffered a loss of a failed inside bar breakout, you will outwit the market and profit from this failure by employing a more apt trade set-up called the Hikkake trade set-up.
Cancel Pending Order if Not Activated.
Consider canceling your Buy or Sell Stop Pending Order if not activated after three to five candlesticks after the breakout candlestick.
It may come out distorted and not bring forth the desired results.
Stop Loss and Take Profit.
Stop Loss for your Buy Stop Pending Order ought to be at the low of the inside bar.
On the contrary, the Stop Loss for your Sell Stop Pending Order should be at the high of the inside bar.
Take Profit Orders for either order needs to be set in adherence to proper risk to reward ratios.
Risk 1 unit to get at least 2 units, meaning a risk to reward ratio of at least 1:2 is the minimum you can take.
You can target more than twice the risk though, depending on how you view the set-up as a trader.
Wrapping Up on How to Trap or Trick the Market with the Hikkake Trade Set-Up in Olymp Trade.
The inside bar strategy is a great one to ace the markets in Olymp Trade.
However, if it has proven not to work perfectly in some situations.
If that be the case for you, here is a way to outperform it by ‘eating’ from its failure.
Trap or trick the market today with the Hikkake trade set-up in Olymp Trade today and grow your trading account significantly.
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