What is the Dark Cloud Cover Pattern?
Dark Cloud Cover
Forex Trading Glossary
Quick Answer: Dark Cloud Cover is a bearish candlestick reversal where a strong rally candle is followed by a candle that closes deep into the prior body.
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.
Avoid False Signals
Combine the pattern with resistance zones or momentum divergences to confirm seller strength.
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.
Related Terms
Learn More About Forex Trading
Now that you understand dark cloud cover, explore our comprehensive guides: