Understanding the Two Crows

What is the Two Crows?

The Two Crows pattern is a bearish reversal pattern that occurs in an uptrend and signals a potential shift from bullish to bearish sentiment. It is characterized by two bearish candles that follow a bullish candle and indicate a possible reversal in the market trend.

How is the Two Crows Identified?

The Two Crows pattern is identified by:

1. First Candle: A strong bullish candle.
2. Second Candle: A bearish candle that opens higher than the previous candle's close but closes lower within the previous candle's body.
3. Third Candle: A second bearish candle that opens within the body of the previous candle and closes lower, confirming the bearish reversal.

When to Use the Two Crows

The Two Crows pattern is used to:

• Identify Potential Reversals: Spot potential bearish reversals in an uptrend.
• Evaluate Market Sentiment: Assess the strength of the reversal based on the pattern's formation.
• Adjust Trading Strategies: Modify trading strategies to align with the anticipated market shift.

Formula Example

To identify the Two Crows pattern:

1. Uptrend Scenario:
   • First Candle: Strong bullish candle.
   • Second Candle: Opens above the close of the first candle and closes within its body.
   • Third Candle: Opens within the body of the second candle and closes lower.

For example:

• If a strong bullish candle is followed by two bearish candles, where the second bearish candle opens above the first bearish candle's close and closes within it, and the third bearish candle confirms the pattern, it may signal a bearish reversal.

Parameters

The parameters for identifying the Two Crows pattern include:

• Data: Defines the type of data to use for the pattern.

  • Value: ohlc
  • Description: The pattern uses Open, High, Low, and Close prices.

• Previous N Candles: Number of preceding candles to check.

  • Default Value: 1
  • Min Value: 1
  • Max Value: 300
  • Description: Checks for the Two Crows pattern in the last N candles.

Conclusion

The Two Crows pattern is a reliable bearish reversal indicator that can help traders anticipate changes in market direction. By recognizing this pattern, traders can make informed decisions about potential bearish reversals and adjust their trading strategies accordingly.