The hikkake pattern, or hikkake, is a

technical analysis In finance, technical analysis is an analysis methodology for analysing and forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the sam ...

pattern used for determining

market Market is a term used to describe concepts such as: *Market (economics), system in which parties engage in transactions according to supply and demand *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an ...

turning-points and continuations. It is a simple pattern that can be observed in

market price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...

data, using traditional

bar chart A bar chart or bar graph is a chart or graph that presents categorical data with rectangular bars with heights or lengths proportional to the values that they represent. The bars can be plotted vertically or horizontally. A vertical bar chart i ...

s, point and figure charts, or Japanese

candlestick chart A candlestick chart (also called Japanese candlestick chart or K-line) is a style of financial chart used to describe price movements of a security, derivative, or currency. It is similar to a bar chart in that each candlestick represents all f ...

s. The pattern does not belong to the collection of traditional

patterns. Though some have referred to the hikkake pattern as an "inside day false breakout" or a "fakey pattern", these are deviations from the original name given to the pattern by Daniel L. Chesler, CMT and are not popularly used to describe the pattern. For example, the name "hikkake pattern" has been chosen over "inside day false breakout" or "fakey pattern" by the majority of book authors who have covered the subject, including: "Technical Analysis: The Complete Resource for Financial Market Technicians" by Charles D. Kirkpatrick and Julie R. Dahlquist, and "Long/Short Market Dynamics: Trading Strategies for Today's Markets" by Clive M. Corcoran, and "Diary of a Professional Commodity Trader" by Peter L. Brandt.

Conceptual basis

The pattern consists of a measurable period of rest and volatility contraction in the market, followed by a relatively brief price move that encourages unsuspecting traders and investors to adopt a false assumption regarding the likely future direction of price. The pattern, once formed, yields its own set of trading parameters for the time and price of market entry, the dollar risk amount (i.e., where to place protective stops), and the expected profit target. The pattern is not meant as a stand alone "system" for market speculation, but rather as an ancillary technique to traditional technical and

fundamental Fundamental may refer to: * Foundation of reality * Fundamental frequency, as in music or phonetics, often referred to as simply a "fundamental" * Fundamentalism, the belief in, and usually the strict adherence to, the simple or "fundamental" idea ...

market analysis methods.

Description

The pattern is recognized in two variants, one bearish and one bullish. In both variants, the first bar of the pattern is an inside bar (i.e., one which has both a higher low and a lower high, compared with the previous bar). This is then followed by either a bar with both higher low and higher high for the bearish variant, or with lower low and lower high for the bullish variant. Before the pattern produces a trading signal it must be confirmed; this happens when the price passes below the low of the first bar of the pattern (in the bearish variant) or above the high of the first bar (in the bullish variant). Confirmation must occur within three periods of the last bar of the signal for the signal to be considered valid.

Origin

The hikkake pattern was first conceived and introduced to the financial community through a series of published articles written by technical analyst Daniel L. Chesler, CMT. The phrase "Hikkake" is a Japanese verb which means to "trick" or "ensnare." Chesler chose the name "hikkake" after consulting with Yohey Arakawa, Associate Professor of Japanese,

Tokyo University of Foreign Studies , often referred to as TUFS, is a specialist research university in Fuchū, Tokyo, Japan. TUFS is primarily devoted to foreign language, international affairs and foreign studies. It also features an Asia-African institution. History The Uni ...

Institutional uses and peer recognition

The hikkake pattern has been adopted for use by IntStream Oy, a global data distributor of the Nordic electricity energy market Nord Pool, in their E2 energy market analysis platform designed for use by institutional traders. The hikkake pattern has also been chosen for inclusion among other foundational,

chart patterns comprising the

Market Technicians Association The CMT Association is a non-profit, global, professional organization of technical analysts headquartered in New York City, servicing over 9,000 market analysis professionals in around 80 countries. The CMT Association certifies that an individual ...

Educational Foundation (MTAEF), College Level Introduction to Technical Analysis. The hikkake pattern has attracted international attention among the financial community.

References

External links

Quantifying Market Deception with The Hikkake Pattern

* [https://web.archive.org/web/20180210224254/www.esignallearning.com/education/marketmaster/archive/2012/archive_index.aspx%3Fdate%3D041312 The Hikkake Pattern - eSignal Trading Education Article Archives]
Historical performance (1980-2013) of the hikkake pattern across 42 futures markets
{{technical analysis Candlestick patterns