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Yes. This also happens when you diversify your trading strategy.
The normal warning applies to this pattern also; the lager the time-frame, the more powerful this pattern becomes. However, with that said, the chosen expiration date should not be as big as the time frame that was chosen. The dark cloud cover pattern is a powerful pattern which when formed implies that there will be very little or at the time even no retracements.
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More importantly, this pattern can be traded using custom indicators so as to increase profitability. These indicators can be the Ichimoku Kinko Hyo. With the Ichimoku Kinko Hyo, if the dark-cloud cover touches the Tenkan line, which is normally red in color, the trader can then be sure of a true reversal.
How To Spot Dark Cloud Cover?
One can easily confuse the dark-cloud cover with the bearish engulfing. However, there is a major difference since the dark-cloud cover is formed by two candlesticks and the second candle which is the bearish candle must move for more than 50% into the region of the previous bullish candle or it is just termed as a simple and normal two candlestick group.
However, the trader should be very careful since if the bearish candlestick is very long to an extent of even being longer than the previous bullish candlestick, then it forms a bearish engulfing instead of a dark cloud cover pattern. The trader should not be in harry to trade the second candlestick before it closes; he or she should be patient enough to wait for it to close so that the trader can buy an option.
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