DEFINITION of 'Ladder Bottom'

The ladder bottom is a five-candle bullish reversal candlestick chart pattern.

BREAKING DOWN 'Ladder Bottom'

The ladder bottom is a bullish reversal pattern that occurs when:

  • The market is in a downtrend;
  • The first, second, and third candles have long black real bodies with each open and close below the open and close of the previous candle;
  • The fourth candle is black with a short real body and long upper shadow;
  • And, the fifth candle is white with an open above the real body of the prior candle.

The theory behind the pattern is that a downtrend loses momentum with an inverted hammer candle that creates an opening for bulls to take over and reverse the trend. In addition to not being very common, the ladder bottom tends to be only so-so at predicting a reversal. The upshot is that it tends to be very right when it does make the right prediction with a strong price movement higher.

Traders should use the ladder bottom in conjunction with other technical indicators to predict bullish reversals. If the pattern does occur, traders may want to exit any short positions or adjust their stop-loss levels, but betting on a long position may require additional confirmation through other chart patterns or technical indicators.

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