Matching Low

The matching low candlestick pattern is a two-bar bullish reversal Japanese candlestick pattern that is best traded as intended using an adjusted entry in all markets.

If you practice traditional candlestick technical analysis, you’re likely losing money with a poor entry.

Keep reading to learn the best matching low trading strategies to take your portfolio to a new high.

What Is a Matching Low Candlestick Pattern?

Matching Low Candlestick Pattern Illustration © Analyzing Alpha
Matching Low Candlestick Pattern Illustration

The matching low candlestick pattern is supposedly a two-bar bullish reversal pattern.

The matching low name comes from the two matching closes on a candlestick chart.

The pattern does lead to bullish price action, but the data tells us this is profitable but short-lived. Before we learn the best matching low trading strategy, let’s learn how to identify this two-bar pattern.

How to Identify the Matching Low Candlestick Pattern

Matching Low Candlestick Pattern on the Amazon (AMZN) October 12th, 2021 daily chart
Matching Low Candlestick Pattern on the Amazon (AMZN) October 12th, 2021 daily chart

The following are the requirements for a valid matching low candlestick pattern:

  • The first candle is bearish.
  • The second candle is bearish closing equal to the previous close.
  • The matching low must occur during a downtrend.

The Matching low appears on the Amazon (AMZN) daily chart on October 12th, 2021.

The price is under the fifty-day moving average at the time of the pattern’s close, which we consider a bearish trend. There’s a large red bearish candle followed by another red candle with a close equal to the first, fulfilling the matching low pattern requirements. 

Now that we know how to identify these matching two-bar patterns, what’s the best matching low trading strategy?

How to Trade Matching Low Candlestick Patterns

The matching low candlestick pattern should be traded using a bullish reversal strategy in all markets using a modified entry, according to a 21-year backtest. 

Let’s learn how traders typically lose money on this pattern, and then we’ll discuss how professional candlestick traders capitalize on their low reliance on data.

Matching Low Bullish Reversal Trade Setup

Matching Low Bullish Reversal Trade Setup on the Ethereum (ETHUSD) September 25th, 2021 daily chart
Matching Low Bullish Reversal Trade Setup on the Ethereum (ETHUSD) September 25th, 2021 daily chart

Let’s practice identifying the matching low pattern.

We see that that price is in a pronounced downtrend. There’s a significant bearish candle followed by a doji candle that closes near the last candle’s close, giving us the matching low pattern.

With the matching low identified, traditional traders enter long at a break of the second candle’s high, setting a stop loss below the same candle’s low.

Traders will lose money using this entry if history is a guide.

Data-driven traders do it differently. These professionals enter long at a break of the second candle’s close, setting their stop loss below the same candle’s low.

Let’s clarify this using the Ethereum (ETHUSD) daily chart on September 25th, 2021.

The second candle’s close is $2,925.75. The price increases the next day, triggering an immediate entry of $2,925.81. This crypto trader likely exited on October 1st, capturing a profit of $238.33. 

Speaking of profits, what does history tell us about the best matching low trading strategy?

Does the Matching Low Candlestick Pattern Work? (Backtest Results)

I backtested the matching low candlestick pattern on the daily timeframe in the crypto, forex, and stock markets using the following rules:

  • A close above the 50-day SMA constitutes an uptrend.
  • I tested risk-reward ranges from 1 to 5. 
  • The optimal risk-reward ratio is selected using profit per bar.
  • Entry and exits are discussed in the how-to trade section above.
  • Confirmation must occur within three days of the pattern signal.

Similar Candlestick Patterns

Multiple candlestick patterns are often confused with the matching low pattern. Identifying patterns correctly will prevent your candlestick trading profits from hitting a new low.

Bullish Counterattack vs. Matching Low

Bullish Counterattack Candlestick Pattern Illustration © Analyzing Alpha
Bullish Counterattack Candlestick Pattern Illustration

The bullish counterattack line, also known as the bullish counterattack, is a two-bar bullish reversal pattern. The only difference between the bullish counterattack and the matching low is the color of the second candle. The bullish counterattack’s second candle is white, whereas the matching low’s is black.

In Neck vs. Matching Low

In Neck Candlestick Pattern Illustration © Analyzing Alpha
In Neck Candlestick Pattern Illustration © Analyzing Alpha

The in neck candlestick pattern is a two-bar bearish continuation pattern. The first candle is a significant bearish candle followed by a bullish candle that opens below the prior day’s low and closes just into the body of the previous bearish candle. 

The reason why these two patterns are confused is due to the candle’s closing location. The in neck’s second candle closes just above the prior day’s close, whereas the matching low closes equal to the preceding day’s close.

The Bottom Line

The matching low is a two-bar bearish reversal pattern. The data shows us that the best matching low trading strategy is a short-term bullish reversal entering on a break of the second candle’s close. While this pattern works, there are more powerful bullish reversal candlestick patterns.

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