What is the Dark Cloud Cover Pattern?

What is the Dark Cloud Cover Pattern?

Dark Cloud Cover is a bearish candlestick reversal pattern that forms when a strong bullish candle is followed by a candle that opens above the previous high but closes deep within the prior body.

Identification Checklist

• Uptrend required: Pattern appears after a rally.
• Gap higher: Second candle opens above the prior high.
• Bearish close: Second candle closes below the midpoint of the first body.
• Volume: Rising volume adds conviction to the reversal.

Trading the Pattern

• Entry trigger: Consider short positions when price trades below the pattern low.
• Stop placement: Place stops above the pattern high.
• Targets: Aim for nearby support or use measured moves.
• Risk control: Dark Cloud Cover works best on higher timeframes to filter noise.

Practical Playbook

• Define context on higher timeframes, then execute on intraday charts.
• Wait for confirmation (acceptance, momentum, or confluence) before entry.
• Size positions conservatively and place stops at clear invalidation levels.
• Adapt to session dynamics; conditions shift between Asia, London, and New York.

Common Pitfalls

• Forcing trades without alignment across timeframe, structure, and catalyst.
• Ignoring spreads/slippage during news or thin liquidity.
• Moving stops or adding to losers instead of honoring the plan.

Illustrative Example

Build a simple playbook: identify bias, mark key zones/levels, define triggers and invalidation, and pre‑set targets for 2–3R. Journal results by session and setup to refine rules. Over time, consistency—not prediction—drives outcomes.

Practical Playbook

• Define context on higher timeframes, then execute on intraday charts.
• Wait for confirmation (acceptance, momentum, or confluence) before entry.
• Size positions conservatively and place stops at clear invalidation levels.
• Adapt to session dynamics; conditions shift between Asia, London, and New York.

Common Pitfalls

• Forcing trades without alignment across timeframe, structure, and catalyst.
• Ignoring spreads/slippage during news or thin liquidity.
• Moving stops or adding to losers instead of honoring the plan.

Illustrative Example

Build a simple playbook: identify bias, mark key zones/levels, define triggers and invalidation, and pre‑set targets for 2–3R. Journal results by session and setup to refine rules. Over time, consistency—not prediction—drives outcomes.