What is the Abandoned Baby pattern?
The Abandoned Baby is a three-candle reversal pattern that can appear either at the top or bottom of a trend. This pattern is rare but considered highly reliable when correctly identified. It consists of:
- A full-bodied candle indicating the continuation of the current trend.
- An isolated Doji with a gap above (or below) the previous candle.
- A third candle that moves in the opposite direction, again with a gap, confirming the reversal.
Important note: The adjacent candles must not overlap; gaps are crucial to validate the pattern. The lack of overlap between the wicks and bodies of the candles is what gives strength to the reversal signal.
Bullish Abandoned Baby
This pattern appears at the end of a downtrend and signals a potential reversal to an uptrend.
Characteristics:
- First candle: large red (bearish) body.
- Second candle: isolated Doji below, with a gap from the previous candle.
- Third candle: green (bullish) candle with an upward gap from the Doji.
Interpretation in Forex: A Bullish Abandoned Baby in a currency pair may indicate seller exhaustion, especially after a sharp decline. It’s a good opportunity to consider long (buy) positions.
Bearish Abandoned Baby
This pattern appears at the top of an uptrend and points to a reversal to a downtrend.
Characteristics:
- First candle: large green (bullish) body.
- Second candle: isolated Doji above, with an upward gap.
- Third candle: red (bearish) candle with a downward gap from the Doji.
Interpretation in Forex: A Bearish Abandoned Baby may indicate that buyers are losing strength and selling pressure could increase, creating short (sell) opportunities in the Forex market.
Why is the Abandoned Baby important?
Though rare, the Abandoned Baby pattern is highly valued by technical traders due to its clarity and strong signal potential. The presence of gaps and the Doji reflect indecision followed by a sharp shift in market control, which in Forex can anticipate strong moves in high-liquidity pairs like EUR/USD, GBP/USD, or USD/JPY.
How to correctly identify an Abandoned Baby?
- Use higher-timeframe charts (H4, Daily or higher) for greater reliability.
- Confirm there are real gaps between the candles (no overlap, not even wicks).
- Combine with other indicators (e.g., RSI, support/resistance) to validate the signal.
Does the pattern work well in Forex?
Yes, but with caution. Since the Forex market operates 24/7, gaps are less common than in stock markets. The Abandoned Baby pattern is more easily identified during weekly openings or in highly volatile pairs. Alternatively, some traders consider “near-gaps” (no wick overlap) as valid.
Where to apply this pattern?
- At reversal points after sharp moves.
- Near key support/resistance levels.
- During high-volatility moments, such as after major economic data releases.