Everything that you need to know about the Downside Tasuki Gap candlestick pattern is here.
Today you’ll learn:
- What Is The Downside Tasuki Gap Candlestick Pattern
- How To Identify The Downside Tasuki Gap Candlestick Pattern
- Variants Of The Downside Tasuki Gap Candlestick Pattern
- How To Trade The Downside Tasuki Gap Candlestick Pattern
- Strategies To Trade The Downside Tasuki Gap Candlestick Pattern
- Strategy 1: Pullbacks On Naked Charts
- Strategy 2: Trading The Downside Tasuki Gap With Support Levels
- Strategy 3: Trading The Downside Tasuki Gap With Moving Averages
- Strategy 4: Trading The Downside Tasuki Gap With RSI Divergences
- Strategy 5: Trading The Downside Tasuki Gap With Fibonacci
- Strategy 6: Trading The Downside Tasuki Gap With Pivot Points
- This is what you learned today
- Learn More
What Is The Downside Tasuki Gap Candlestick Pattern
The Downside Tasuki Gap is a Japanese candlestick pattern.
It’s a bearish continuation pattern.
Usually, it appears as a pause after a price move to the downside and shows rejection from higher prices.
The pattern is bearish because we expect to have a bear move after the Downside Tasuki Gap appears at the right location.
It’s a continuation pattern because before the Downside Tasuki Gap appears we want to see the price going down, thus it’s also a frequent signal of a trend continuation.
The Downside Tasuki Gap pattern is also a mirrored version of the Upside Tasuki Gap candlestick pattern.
How To Identify The Downside Tasuki Gap Candlestick Pattern
The Downside Tasuki Gap candlestick pattern is formed by three candles.
Here’s how to identify the Downside Tasuki Gap candlestick pattern:
- Two consecutive solid big red candles
- Between both candles, there’s a gap
- Finally, a small green candle will close inside the gap
It looks like this on your charts:
Variants of the Downside Tasuki Gap Candlestick Pattern
The Downside Tasuki Gap candlestick pattern may appear a little different on your charts.
The candles may or not have wicks.
The open of the last candle may have or not have a gap with the close of the second candle.
Here’s what it may look like on your charts:
How To Trade The Downside Tasuki Gap Candlestick Pattern
To trade the Downside Tasuki Gap candlestick pattern it’s not enough to simply find a series of candles with the same shape on your charts.
Let me explain.
What makes a pattern valid is not just the shape, but also the location where it appears.
This means that the same shape appearing at different locations may have different meanings.
When trading the Downside Tasuki Gap, we want to see the price first going down, making a bearish move.
A Downside Tasuki Gap appearing after this bearish move is a sign of a possible trend continuation to the downside.
It looks like this:
Now you’re thinking.
“When do I open my trade?”
It’s simple, the Downside Tasuki Gap pattern is traded when the low of the last candle is broken.
That’s your conservative trigger to short.
It looks like this:
Now, you also want to protect yourself because when trading things don’t always move as we expect.
And for that, we use a stop loss.
There are several different types of stop losses.
The most common is to use the other side of the pattern to set it.
Like this:
But wait, don’t jump into trading the Downside Tasuki Gap right yet.
There are a few more things to know.
Ideally, to increase the accuracy, we want to trade the Downside Tasuki Gap candlestick pattern by combining it with other types of technical analysis or indicators.
Here are a few strategies to trade the Downside Tasuki Gap pattern.
Strategies To Trade The Downside Tasuki Gap Candlestick Pattern
Strategy 1: Pullbacks On Naked Charts
As a bearish continuation pattern, the Downside Tasuki Gap is a great pattern to watch for when the price is on a downtrend.
Just wait for a pullback to start, and then spot when the Downside Tasuki Gap appears.
That often signs the end of the pullback and the start of the new leg to the downside.
Here’s an example:
Strategy 2: Trading The Downside Tasuki Gap With Support Levels
Support and resistance levels are great places to find entries.
Since we are looking for continuation moves to the downside, we want to trade the Downside Tasuki Gap using support levels broken and retested.
How does it work:
- Draw support levels on your charts
- Wait for the price to move to the downside hitting the support level and breaking it
- After that, you want to see the price coming back to retest the support
- Check if a Downside Tasuki Gap appears at that level
- Short when the price breaks the low of the last candle of the Downside Tasuki Gap
- Set your stop loss and take profit levels, and expect a move to the downside
Here’s an example:
Strategy 3: Trading The Downside Tasuki Gap With Moving Averages
Moving averages are great trading indicators to trade trends.
The idea here is to trade pullbacks to the moving average when the price is on a downtrend.
How does it work:
- Find a downtrend, with the price jumping below a moving average
- Wait for the price to go up and hit the moving average
- Check if a Downside Tasuki Gap appears at the moving average
- Short when the price breaks the low of the last candle of the Downside Tasuki Gap
- Set your stop loss and take profit levels, and expect another leg to the downside
Here’s an example:
Strategy 4: Trading The Downside Tasuki Gap With RSI Divergences
This is a bit different from the other trading strategies.
To find a bearish RSI Divergence we want to see the price on an uptrend first, making higher highs and higher lows.
Here’s how it works:
- Find an uptrend
- Mark the highs that the price makes after each leg to the upside
- At the same time compare the price highs with the RSI indicator
- When you see the RSI making lower highs while the price making higher highs, you found your divergence
- Now you wait until a Downside Tasuki Gap appears at a price higher high, aligned with an RSI lower high.
- Short when the price breaks the low of the last candle of the Downside Tasuki Gap
- Set your stop loss and take profit levels, and expect a move to the downside.
It looks like this:
Strategy 5: Trading The Downside Tasuki Gap With Fibonacci
Another popular way of trading the Downside Tasuki Gap candlestick pattern is using the Fibonacci retracement tool.
Fibonacci shows retracement levels where the price will tend to revert frequently.
Depending on the strength of the trend, different levels are more likely to work better with the Downside Tasuki Gap pattern. Here you can learn more about the different Fibonacci retracement levels.
Here’s how the strategy works:
- You want to see the price on a downtrend, or at the start of a new one
- Then you wait for a move to the upside, they always happen at some point
- Pick your Fibonacci tool and draw the levels from the high to the low of the move
- When the price hits a Fibonacci level and prints a Downside Tasuki Gap, that’s what you are waiting for
- Short when the price breaks the low of the last candle of the Downside Tasuki Gap
- Set your stop loss and take profit levels, and expect a move to the downside
Here’s an example:
Strategy 6: Trading The Downside Tasuki Gap With Pivot Points
Pivot Points are automatic support and resistance levels calculated using math formulas.
If you are day trading, the Daily Pivot Points are the most popular, although the Weekly and Monthly are frequently used too.
Here’s how to trade the Downside Tasuki Gap pattern with Pivot Points:
- Activate the Pivot Points indicator on your charts
- Check which Pivot Points are below the price, those will tend to work as resistances when broken
- Ideally, you want to see the price on a downtrend
- Wait for a price move to the downside to a Pivot Point level and a break
- At that level, you want to see the Downside Tasuki Gap pattern appearing and retesting the broken pivot point
- Short when the price breaks the low of the last candle of the Downside Tasuki Gap
- Set your stop loss and take profit levels, and expect a move to the downside
Like this:
This is what you learned today
- The Downside Tasuki Gap is a three-candle pattern.
- To be valid, ideally, we want to see it during a downtrend.
- It’s a bearish continuation pattern, meaning that it signs a potential continuation of a downtrend.
- To increase the accuracy, you can trade the Downside Tasuki Gap using pullbacks, moving averages, and other trading indicators.
Now I want to hear from you.
Do you trade the Downside Tasuki Gap candlestick pattern?
Let me know in the comments below.
Learn More
- List of all candlestick patterns explained
