On Neck Candlestick Pattern
Bullish and Bearish On-Neck Candlestick Patterns: A Guide for Forex Traders
Candlestick patterns play a crucial role in Forex trading, helping traders identify potential market trends and reversals. Among these patterns, the On-Neck pattern is a unique formation that signals potential trend continuation rather than a reversal.
In this blog post, we’ll explore the Bullish and Bearish On-Neck candlestick patterns, how they form, what they look like, and what they could mean when spotted on a MetaTrader 4 (MT4) trading chart.
What is an On-Neck Candlestick Pattern?
An On-Neck pattern is a two-candlestick continuation pattern that occurs during strong trends. It signals that the current trend may continue despite a temporary pullback.
There are two types of On-Neck patterns:
- Bullish On-Neck – Appears in an uptrend and suggests continued bullish momentum.
- Bearish On-Neck – Appears in a downtrend and signals continued bearish momentum.
These patterns get their name because the second candlestick closes at or near the low (for bearish) or high (for bullish) of the first candlestick, resembling a neckline.
Bullish On-Neck Candlestick Pattern
What It Looks Like:
- The first candle is a strong bullish (green or white) candle.
- The second candle is bearish (red or black) and smaller in size.
- The second candle opens higher but closes at or very close to the high of the first candle.
What It Means in Forex Trading:
The Bullish On-Neck pattern suggests that after a brief pullback, buyers are still in control, and the uptrend is likely to continue.
📌 Trading Insights:
- Found in a strong uptrend, confirming bullish momentum.
- A signal that buyers are not giving up despite minor selling pressure.
- Traders may consider entering a long (buy) position after the pattern forms, especially if the next candle is bullish.
Bearish On-Neck Candlestick Pattern
What It Looks Like:
- The first candle is a strong bearish (red or black) candle.
- The second candle is bullish (green or white) and smaller in size.
- The second candle opens lower but closes at or very close to the low of the first candle.
What It Means in Forex Trading:
The Bearish On-Neck pattern suggests that after a brief upward pullback, sellers are still in control, and the downtrend is likely to continue.
📌 Trading Insights:
- Found in a downtrend, confirming bearish dominance.
- A signal that sellers are still strong, preventing further upward movement.
- Traders may consider entering a short (sell) position after the pattern forms, especially if the next candle is bearish.
How to Identify On-Neck Patterns on MT4
Identifying the On-Neck pattern on MetaTrader 4 (MT4) is simple:
- Switch to Candlestick Mode – Ensure your MT4 chart is set to candlestick mode for better pattern visibility.
- Look for a Strong Trend – Check whether the market is in a clear uptrend or downtrend before identifying the pattern.
- Find the Two-Candle Formation – Look for a large first candle followed by a smaller second candle that closes at the high (bullish) or low (bearish) of the first candle.
- Confirm the Trend Continuation – Wait for the next candle after the pattern to confirm whether the trend continues in the expected direction.
Trading Strategies Using On-Neck Patterns
1. Trend Continuation Strategy
- Bullish On-Neck in an Uptrend: Consider entering a buy position after confirmation.
- Bearish On-Neck in a Downtrend: Consider entering a sell position after confirmation.
2. Stop-Loss Placement
- For Bullish On-Neck, place a stop-loss below the low of the first candle to protect against reversals.
- For Bearish On-Neck, place a stop-loss above the high of the first candle to minimize risk.
3. Confirm with Technical Indicators
To improve accuracy, traders can combine the On-Neck pattern with indicators, such as:
✅ Moving Averages – To confirm the prevailing trend.
✅ RSI (Relative Strength Index) – To check if the market is overbought or oversold.
✅ MACD (Moving Average Convergence Divergence) – To identify momentum shifts.
Final Thoughts
The Bullish and Bearish On-Neck candlestick patterns are valuable tools for traders looking to confirm trend continuation. While they do not indicate trend reversals, they provide traders with high-probability trade setups when combined with other technical analysis tools.
By recognizing these patterns on MetaTrader 4, traders can make more informed decisions and ride strong trends with confidence.
📌 Key Takeaways:
✔ Bullish On-Neck – Appears in an uptrend, signaling continued bullish movement.
✔ Bearish On-Neck – Appears in a downtrend, signaling continued bearish movement.
✔ Use Confirmation – Always wait for the next candle before entering a trade.
✔ Combine with Indicators – Support and resistance, moving averages, and RSI can strengthen trade decisions.
