Helpful Forex Training Tips About The Dark Cloud Cover Pattern

As you may have learnt in your FOREX TRADING COURSE the dark cloud cover pattern is made up of two very strong candles from both the bulls' and the bears' side. The first candle is a strong white candle and the second candle is a strong black candle that closes well into the the prior white candle's real body. This dual candle pattern needs to appear at the end of an up-trend otherwise it does not qualify as a dark cloud cover.

However, the basics that you have read on various articles around the web may not be enough to assist you with your on-going FOREX TRAINING when it comes to using the dark cloud cover in your Forex trading. As a result, the purpose of this article is to discuss a few rules and scenarios that you may come across which you may approach with confusion.

Firstly, we already know about the architecture of the dark-cloud cover; two strong candles from both sides. The open, height and close of any candle reflects the power each side had in a specific trading session. So, if the second black candle is strong and it appears at the end of an up-trend we know that the bears are becoming stronger than the bulls. However, the strength of the candle does not provide us with price targets. Any credible Forex trading course should teach you that just because the candle is strong it does not mean that the currency pair you are trading will fall to where it originally started or nearby. The fall might be short-lived or it may go down further but that prediction should be based on the overall market condition, your indicators and the skills you have gained throughout your Forex training.

Secondly, try not to trade dark cloud covers that are well of their highs. Every so often you will see a dark cloud cover that is absolutely huge. The white candle will be the strongest and tallest you have ever seen and then it will be followed by a dark candle that is just as large but, it is going in the opposite direction. Other than showing large volatility, the market is obviously telling you that the bears have stepped up to the challenge. However, going short (placing a sell) here may not provide you with the best target/profit results as both candles are so high hence, making the second black candle's close well of its highs. Instead, draw a resistance area that peaks at the highest high out of the two candles and wait for a bounce of that resistance area to confirm your trade is prone to going downwards.

Thirdly, resistance areas play a very important role. If the resistance area is broken during the day by a candle that appears prior to the second bounce but it closes below it, the rule of waiting for a bounce still stands. All this shows is that the bulls tried to invalidate the resistance area but were simply not strong enough.

Lastly, if the resistance area is broken slightly or marginally by the white candle in this two candle pattern it should be viewed as a positive breakout for the bulls – for now. Even though it is not convincing, your Forex trained mind should convince you to pay extra attention to this chart. In simple terms, this trade is too risky at the moment. However, even though this is a positive signal for the bulls, the breakout itself is not very convincing. Your Forex training should force you to wait for the next black candle to form a dark cloud cover, if you are still looking to go short. The unconvincing breakout by the white candle is simply telling us that the bulls have failed to hold control over their new highs.