A mat hold pattern is a signal of a trend continuation. The pattern is rare and can often be confused with other similar patterns such as a rising three. Traders typically allow some level of deviation from the strictest form of a mat hold pattern depending on their trading style. To fully understand how to identify a mat hold pattern, it’s important to first know how to read a candlestick chart.
What does a Mat Hold Pattern look like?
A mat hold pattern can form during an upward or downward trend. In an upward trend, the first inclination of the pattern immerging is a large green candle followed by a gap upwards and three smaller red candles which stay above the low of the first candle. The fifth candle is another large green candle which closes at least at the high of the first candle. The pattern as a whole, shaped like an “N”, indicates a continuation of the initial upward trend but it doesn’t suggest the size of the move.
A mat hold pattern during a downward trend is formed by an initial red candle followed by a gap below and three smaller green candles which stay below the close of the first candle. The fifth candle is another red candle which closes below the rest of the pattern. Neither variation of a mat hold indicates how long the trend will continue so it’s not advisable to expect a large move.
How to trade a Mat Hold Pattern
As there is no profit target on a mat hold pattern, it’s unadvisable to expect large profits from this pattern alone. Scalp traders may try to use higher leverage to capitalise on a smaller move and a common practise would be to add a stop loss at the open price of the fifth candle. This minimises losses if the price moves in the opposite direction.
Some traders may allow for small deviations in the pattern because of it being so infrequent. For example, candles 2, 3 and 4 may be dragged out over an extra candle so candle 5 may, in fact, be candle 6. Either way, using a mat hold pattern in conjunction with other technical indicators may be preferable to using it alone. An indicator which uses moving averages such as the MACD or RSI could show whether the asset is overbought or oversold, giving the trader a better idea of where the price is according to the current trend.
All candlestick patterns work best when used together with other signals and indicators. The fact that the mat hold pattern doesn’t give a predicted profit level makes it less than ideal to use alone. It is, however, considered a reliable pattern thanks to its scarcity so scalp traders may like to take a bet that the continuation of the prior trend will play out. If a mat hold appears as part of a larger pattern like a bull flag or a cup and handle, it may give more weight to the signal.