What is Counterattack Lines?
Key Highlights:
- Bullish counterattack lines indicate the possibility of reversal from a downtrend into an upward trend.
- Bearish counterattack lines indicate a possible reversal from an upward trend into a downward trend.
- There are two candles with different colors and directions in the pattern. A third or fourth candle is recommended, confirming the following price path per the pattern.
Counterattack Lines Meaning
According to the definition of counterattack lines, reversal patterns that show two candlesticks diverging from each other are offered on these lines. These lines are intended to message traders about the upcoming reversal trends in the current market. Counterattack lines appear whenever the upward trend or downward trend is in progress. Traders can see and understand two kinds of patterns, i.e. bullish or bearish, from these candlesticks.
The pattern variant is bullish, and vice versa for the bearish, when the counterattack line pattern appears downward. The bullish counterattack pattern has a black candle opening, whereas the bearish's opens in white to describe the candlestick lines. As mentioned below, two essential things must be done before confirming this is a Bullish counterattack candlestick pattern.
- There should be an extreme downward movement for the market to show a positive trend.
- A white candle closing close to the black candle appears after the first black candle with a real body.
The same applies to the candlestick pattern of the bearish counterattack lines. To witness a pessimistic market trend, an extreme upward movement should take place. One white candle with a real body comes first, followed by a black candle nearly the same height as the first.
Due to their specificity, the counterattack line pattern does not consistently appear on candlestick charts. Traders should apply counterattack lines and some of the technical analysis strategies if they seek good returns in this reversal trend. As shown by the price changes after positive and negative reversals, traders can trade with a stop loss. This signal indicates the price change according to traders' expectations.
How to Use Counterattack Lines?
You must first identify the pattern of a candlestick chart to understand how counterattack lines work. After that, you must identify trend reversal patterns, such as Bullish or Bearish, before starting a trade. If you notice a trend reversal that starts with gaps, check the candle openings to see if they go up or down. Ensure that these lines correspond to existing trends as well. The evolution of this candle should be consistent with the current trend. When the candle opposes a movement, you can see that it will close closer to its prior one.
The pattern of counterattack lines is formed by satisfying all the abovementioned conditions. The trader then needs to hold tight until a confirmation candle gives the green sign that he is ready to take his position on the market. After the first two candles or after the third and fourth, respectively, you should enter this business only if you see a movement. Before moving ahead with the trade, check your confirmation indicator if you enter into a Bullish reversal.
It is recommended that traders mix the counterattack line pattern with other forms of technical analysis to achieve the desired results. Traders can avoid losing money in the future or failing in a deal by doing this.
Psychology of Counterattack Lines
The psychology of counterattack lines in bullish and bearish are as follows.
Bullish
These candles are against the current downward trend on the market. It begins as a descent and closes beneath the open, creating a long-bodied candle. Next, the other candle opens to reveal a gap under the last close. When the second candle forms on the candlestick chart pattern, it indicates a bullish trend reversal will occur in the market. The third or fourth price action suggests a positive reversal trend, alerting the trader.
Bearish
You can see the uptrend market in this pattern. The first counterattack line candle is moving to the left and closing in front of the open doorway, thus forming a large candle. In this case, the bears are defensive, whereas in the bullish case, they are defensive. The opening of counterattack lines will reduce buying pressure, reducing the safety for bears moving to the opposite side and thus destroying the candles on the first counterattack line.
The price action alerts the trader to the negative reversal trend by asserting on the third or fourth candle.
Conclusion
It is rare for a counterattack candlestick pattern to occur. When trading based on the appearance of a counterattack candlestick pattern, experts urge traders to wait for candle confirmation before making any trades. It should always be crossed with other technical indicators before making trading decisions. In the case of unexpected changes, this helps to minimise your trading losses.
