A two-candle pattern which crypto traders see as a reliable suggestion of a strong market reversal is a kicker. Kickers are defined by a sharp change of direction and traders use them to try to determine whether the market is being controlled by the bulls or the bears. To understand how a kicker works, it’s first important to know how to read a candlestick chart.
How to recognise a Kicker
The cryptocurrency markets are comprised of two sides of competing players, buyers (or bulls) and sellers (or bears). If the bulls are outweighing the bears, the price of the asset rises. Conversely, if the bears are in control, the price will go down. A bullish kicker starts with a red candle and is followed by a comparatively rapid move upward, visualised by a long green candle who’s open is the same as the previous day. An even more bullish signal is if there is a slight gap between the two candles.
A bearish kicker is the exact opposite, a long red candle following a green candle with a gap between the two. This pattern suggests a strong change in market momentum and is particularly reliable when found in certain market conditions.
When to trade on a Kicker
A kicker is considered to be a reliable trading signal, especially if it appears during an upward or downward trend. If a kicker is found during a period of sideways chop or consolidation, it still could signal a momentous move for the asset, but it could be an idea to check for other patterns and signals first. The most favourable situation in which to find a kicker is when the market is considered overbought or oversold. For this reason, learning how to use technical indicators such as the MACD and RSI can be particularly useful in order to maximise the accuracy of your trade decisions and, by extension, your profits. Knowing when a market is overbought or oversold can add extra weight to smaller, more simple patterns found on a candlestick chart.
A bullish or bearish kicker is one of the more reliable trading signals, especially when found during periods where an asset is considered overbought or oversold. As always in trading, the best strategy involves studying multiple charts and looking out for more than one pattern, signal or indicator. Technical analysis is about becoming familiar with common market movements and knowing when to trade and when to simply watch.
A frequent mistake made by new traders when spotting a kicker is to assume that the move has happened too quickly and wait for a pullback. This can leave the trader kicking themselves (pun intended) when the price continues to form a monster move which could easily have provided great profits for swing traders and scalpers alike. We’re not suggesting that you should react instantly to the appearance of a kicker without first studying the charts for other signals but don’t leave it until the move has played out as you may be left wishing you’d made the call earlier.