What is Matching Low

The Complete Guide On Matching Low In Candlestick Chart

Understanding key patterns and signals can make a huge difference in online share trading decisions. The Matching Low is one such pattern that can make a difference in online trading. It is a bearish reversal pattern that occurs on a candlestick chart. Additionally, online traders can gain a competitive edge by recognizing and understanding the pattern.

This will enable them to predict market trends and make informed investment decisions. In this article, we'll go over matching low patterns, how to trade them, traders' psychology, and limitations.

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Table of Content

  1. The Complete Guide On Matching Low In Candlestick Chart
  2. What is a Candlestick Chart?
  3. What is Matching Low?
  4. How to Trade the Matching Low Candlestick Pattern?
  5. What is the Psychology of Matching Low Traders?
  6. Limitations of Matching Low
  7. Conclusion

What is a Candlestick Chart?

Before we learn what a matching law is, it is crucial to understand the concept of a candlestick chart. Basically, a candlestick chart is a financial chart used to describe the price movements of a stock. On a stock chart or graph, you will notice coloured candles positioned at different points. These are called candlesticks. And the stock chart is called Candlestick Chart.

Candlesticks show the price fluctuations of a stock visually. Using candlesticks, you can see where the market is going (market trend) and predict when it'll reverse (when the current trend will reverse). Additionally, there are three parts to each candle:

  • Body
  • upper shadow
  • lower shadow

Furthermore, the body has four points of data, and it's either green or red:

  • Open: First trade during the period.
  • High: The highest traded price.
  • Low: The lowest traded price.
  • Close: The last trade during the period.

What is Matching Low?

A Matching Low candlestick pattern is a bearish reversal pattern on a candlestick chart. Moreover, the pattern is always represented by two candles and helps predict when the current trend is going to reverse.

This pattern implies that the current selling is about to end, indicating the stock has hit its bottom price or support level. Moreover, the candlestick pattern has two long down candles with matching closing prices that are black or red.

Additionally, candlestick patterns work on the principle of investor sentiment. For example, investors will sell their investments if they think a company isn't doing well or won't because of current negative factors.

As soon as a sell-off starts, the price drops, forcing other investors to sell. In turn, this leads to steep declines in stock prices. Nevertheless, every company has some revenue and good business factors that represent a support level (the point where prices should stop falling).

There are two things that can happen at this level of support; either the stock will rise in price with strong buying interest or it will fall more with strong selling and little buying. This point is reflected in the matching Low candlestick pattern. It occurs after a steep decline in the price of a particular stock. Basically, it means the stock has reached its support levels or reached its potential bottom. 

How to Trade the Matching Low Candlestick Pattern?

Matching Low candlestick pattern starts with a long black candle on the first day, followed by a second candle higher than the previous day's closing price on the next day. The second candle's closing price is the same as or very close to the first day's opening price.

If you spot the Matching Low candlestick pattern, you'll know the stock's price has hit support. The first long black candle means price falls are likely to continue. This means the bulls opened the price higher than yesterday's closing price.

A second small candle shows that the bears are losing control, which is the stock's support level. If the bulls invest, you might see the price go up, or you might see it go down more. However, at this point, it's better to do a detailed technical analysis and use immediate stop losses.

What is the Psychology of Matching Low Traders?

The Matching Low Trader Psychology is like a strategy between bulls and bears. Bears want prices to fall, while bulls want prices to rise. However, we can determine who is winning the game by looking at the pattern.

If the first candle is black and long, and the closing price is lower than the opening price, the bears are winning. It suggests that prices are likely to continue to decline.

However, it is still possible for the bulls to fight back. When there is a larger gap between the closing price and the opening price, it indicates the bulls are beginning to win. There is a possibility that prices will rise again, and the trend of prices going down might change.

Furthermore, trader psychology can help us determine who's winning the game between bears and bulls. It also helps us predict what might happen next to prices.

Limitations of Matching Low

There's no doubt that the pattern works since the price tends to move well following the pattern, but it's unclear which direction it'll move. It acts more like a continuation pattern than a reversal pattern. Therefore, it's best to wait for confirmation before making any decisions. It means waiting for the price to break out in a certain direction after the pattern appears. After that, you can trade.

Moreover, the candlestick patterns don't tell us how much profit we can make. Each trader has to decide when to take profit based on their own strategy.

Plus, this pattern doesn't happen very often, so you won't get many chances to use it. That's why it's recommended to use other methods of analysis, like watching the price move, using technical indicators, or looking for bigger patterns on the chart. These can help confirm the pattern.

Conclusion

In online share trading, understanding the Matching Low pattern can help traders in predicting trend reversals. This bearish reversal pattern shows two long down candles with matching closes signifying the end of selling pressure and the stock has reached support. Additionally, by understanding the psychology of traders, you can determine price movements.

However, it's important to confirm the pattern before taking action. You can use other analysis methods, like technical indicators and chart patterns, to support the pattern. Also, the pattern doesn't happen often, but it is effective to identify market opportunities.

Matching Low FAQs

In the Matching Low pattern, two downward candles have the same or similar closing prices. On the other hand, the Three Stars in the South pattern consists of three candles.

Yes, candlestick patterns are good as they show four points: open, close, high and low throughout the specific time.

You can make trading decisions with the help of Candlestick charts to identify patterns. However, it is recommended to combine candlestick charts with other technical methods.

The green or white body indicates a price increase. While red or black body indicates a price decline.

Doji, Dragonfly doji, Gravestone doji, Spinning top and Hammer are considered the most powerful candlestick pattern.