Hikkake pattern: trading the false breakout
A guide to the hikkake pattern – how to identify bullish and bearish setups, how to trade false breakout signals, and how it differs from a standard inside candle. The hikkake pattern can help traders identify potential false breakouts, but its usefulness depends on context, confirmation and risk management. This guide explains how the setup works, how to read it on a chart, and where it differs from a standard inside candle pattern.
Takeaways
- The hikkake pattern identifies a false breakout from an inside candle, followed by a reversal in the opposite direction.
- A bullish hikkake forms when a false downside breakout reverses back above the inside candle's low; a bearish hikkake is the mirror image.
- The entry triggers when price trades through the opposite boundary of the inside candle, not during the initial false breakout.
- Traders typically place the stop-loss beyond the extreme of the false breakout candle – the level at which the pattern's logic is invalidated.
- Hikkake setups aligned with the prevailing trend may provide cleaner context than counter-trend versions.
- A failed hikkake – where the anticipated reversal does not follow – can itself signal continuation in the original breakout direction.
What is the hikkake pattern?
The hikkake pattern is a price action formation, visible on candlestick charts, point-and-figure charts and bar charts, that identifies a false breakout of an inside candle, followed by a reversal in the opposite direction. The word 'hikkake' derives from a Japanese verb meaning to trick or ensnare – a reference to the pattern's mechanism: price appears to break out of a consolidation range, drawing breakout traders in, before reversing and trapping those traders on the wrong side. The pattern was formally described by Daniel L. Chesler, CMT, in 2004 and has since become a recognised concept in technical analysis, particularly among price action traders.
The hikkake is built on two components: an inside candle and a false breakout of that inside candle. An inside candle is a candle, or bar, whose high and low are entirely contained within the high and low of the preceding candle. It represents a contraction in price range and often signals a period of indecision or consolidation before the next directional move. The hikkake uses this inside candle as its foundation: when price initially breaks beyond the inside candle's boundary but then quickly reverses back inside it, the breakout is treated as false, and the subsequent move in the opposite direction becomes the signal.
How do you identify the hikkake pattern on a chart?
The hikkake pattern is identified by sequence rather than a single candle: first an inside candle forms, then price breaks out, reverses back into the range and signals a potential move in the opposite direction.
- Step 1. Locate an inside candleAn inside candle is a period, such as a day or hour, whose high is lower than the high of the immediately preceding candle, known as the 'mother candle', and whose low is higher than the low of the mother candle. The inside candle is fully contained within the mother candle's range. Identify this formation on any timeframe: the mother candle sets the reference range, and the inside candle forms the contraction around which the pattern develops.
- Step 2. Wait for a breakout of the inside candleThe hikkake begins when a subsequent candle breaks beyond the inside candle's high or low. If the next candle after the inside candle trades above the inside candle's high, this is an apparent bullish breakout. If it trades below the inside candle's low, it appears to be a bearish breakout. This move is what attracts and traps traders who enter in the direction of the break.
- Step 3. Observe the reversal back inside the rangeThe critical feature of the hikkake is that the breakout fails. Within one to three candles of the apparent breakout, price reverses back inside the inside candle's range, trading within the high and low established by the inside candle. This failure indicates that the initial breakout was a false move, or 'fakeout', rather than the start of a sustained directional trend.
- Step 4. Wait for the pattern triggerThe hikkake is considered triggered when price closes back inside the inside candle's range, or when price subsequently trades through the opposite boundary of the inside candle. This trigger marks the point at which the pattern signals a potential move in the direction opposite to the initial, failed breakout.
Past performance is not a reliable indicator of future results.
Is the hikkake pattern bullish or bearish?
The hikkake pattern can be either bullish or bearish, depending on the direction of the initial false breakout.
Bullish hikkake
A bullish hikkake occurs when the initial false breakout is to the downside. Price breaks below the inside candle's low, trapping bearish breakout traders in a short position, and then reverses back above the inside candle's low. As those short positions are covered and new buyers enter, the price may move higher. The bullish hikkake signal is triggered when price re-enters the inside candle's range from below, and the anticipated move is upward. The setup can be particularly relevant when the inside candle forms at or near a recognisable support level, as this may add useful context to the false breakdown and possible bounce.
Bearish hikkake
A bearish hikkake occurs when the initial false breakout is to the upside. Price breaks above the inside candle's high, trapping bullish breakout traders in a long position, and then reverses back below the inside candle's high. As those long positions are closed and new sellers enter, the price may move lower. The bearish hikkake signal is triggered when price re-enters the inside candle's range from above, and the anticipated move is downward. The setup can be particularly relevant when the inside candle forms at a recognisable resistance level.
Context and trend alignment
The direction of the prevailing trend provides important context for the hikkake. A bullish hikkake that forms during a broader uptrend represents a pullback-and-continuation setup: the false breakdown briefly tests lower, traps bears, and then may continue the dominant upward move. A bullish hikkake that forms in a downtrend is a potential reversal signal, though counter-trend setups carry greater risk and may have a lower follow-through rate. Aligning the hikkake direction with the prevailing trend can help traders filter for more selective setups, though it does not guarantee an outcome.
How to trade the hikkake pattern
Trading the hikkake requires a defined sequence of steps, from confirming the full pattern structure to setting entries, stops and profit targets based on the pattern's own geometry.
Step 1. Identify the full pattern structure
Locate the mother candle, the inside candle, and the false breakout – usually one to three candles that break beyond the inside candle's boundary but fail to sustain the move. Confirm that the false breakout has genuinely reversed: price must trade back within the inside candle's range, rather than merely stall at the boundary.
Step 2. Determine the entry point
The standard entry approach for the hikkake is to enter when price trades through the opposite boundary of the inside candle – the boundary that was not broken in the initial false breakout. For a bullish hikkake, following a false breakdown, the entry triggers when price trades above the inside candle's high. For a bearish hikkake, following a false breakout to the upside, the entry triggers when price trades below the inside candle's low.
An alternative approach is to enter on a close back within the inside candle's range, at the close of the first candle that reverses back inside. This earlier entry captures more of the potential move but uses a lower-confirmation signal. The entry choice depends on the trader's risk tolerance and the momentum of the reversal.
- Standard entry:Stop order at the opposite boundary of the inside candle
- Early entry:Market or limit order on the close of the first reversal candle back inside the range
Step 3. Place the stop-loss
For a bullish hikkake, traders typically place the stop-loss below the low of the false breakdown candle, which is the candle that broke below the inside candle's low. For a bearish hikkake, they typically place the stop-loss above the high of the false breakout candle. This level represents the point at which the pattern's logic is invalidated: if price returns to that extreme, the false breakout may not have been false after all, and the anticipated reversal may not occur. Stop-loss orders are not guaranteed. Guaranteed stop-loss orders (GSLOs) incur a fee if activated.
Step 4. Define a potential target area
The initial profit target for a hikkake trade is typically derived from the pattern's own structure: the height of the mother candle's range projected from the entry level. If the mother candle spans 40 pips from high to low, the initial target is 40 pips from the entry. More conservative traders may use the opposite boundary of the mother candle's range as their first target. A second target, for traders who scale out of the position, can be set at a significant support or resistance level beyond the pattern's immediate range.
Step 5. Monitor the trade and confirmation
After entry, monitor whether the reversal is gaining momentum. Rising volume, a series of strong candles in the direction of the trade, and the failure of price to retrace back to the inside candle's boundaries may all support the validity of the pattern. If price returns to the inside candle's range without making progress toward the target, traders may consider tightening the stop or exiting the position, as the momentum that the pattern suggests may not be developing.
Past performance is not a reliable indicator of future results.
What is a failed hikkake pattern?
A failed hikkake occurs when the anticipated reversal does not materialise after the false breakout. The pattern triggers – price re-enters the inside candle's range – but instead of continuing in the direction of the expected reversal, price reverses again and resumes the direction of the original apparent breakout. This failure can occur because the initial move identified as a false breakout was not actually false: it was a genuine trend impulse that paused briefly before continuing.
Failed hikkakes are more common when the pattern forms against a strong prevailing trend, when the false breakout candle has high volume and momentum, or when a significant fundamental catalyst is driving price in the breakout direction. A trader who has pre-defined their stop-loss correctly should be stopped out at a manageable loss before a failed hikkake leads to further downside. The pattern's stop-loss placement – beyond the extreme of the false breakout candle – is designed to help manage this scenario.
A failed bearish hikkake, where the expected downward reversal fails and price continues upward, is sometimes used as a signal by traders who identify the pattern failure. In this case, the strength of the initial upside breakout is confirmed by the pattern's failure to reverse it, providing a possible second opportunity to enter long in the original breakout direction.
Best indicators to use with the hikkake pattern
No indicator confirms every aspect of the hikkake on its own. Combining the pattern with volume data, momentum tools and trend context may help traders identify more selective setups.
Volume analysis
Volume provides evidence of the conviction behind each candle in the hikkake sequence. A false breakout on declining or below-average volume may provide additional context for a hikkake signal, as thin-volume breakouts are more likely to be short-lived. A subsequent reversal candle accompanied by expanding volume suggests that the move back inside the range has broader participation. When the reversal candle's volume exceeds the breakout candle's volume, it may support the hikkake setup.
Relative strength index
The relative strength index (RSI) provides momentum context for the hikkake. A bullish hikkake that forms when the RSI is near or below 30, suggesting oversold conditions, may be reinforced by the momentum reading: the market is stretched to the downside, making a false breakdown and subsequent bounce more plausible. A bearish hikkake near RSI 70 can be viewed in a similar way. Conversely, a hikkake that forms at a neutral RSI level, around 50, without a clear momentum extreme may provide a weaker signal.
Moving averages
Moving averages identify the prevailing trend direction and provide context for whether a hikkake is a continuation or reversal setup. A bullish hikkake that forms with price above both the 20-day and 50-day moving averages may be interpreted as a continuation setup in an uptrend; the false breakdown acts as a pullback that traps bears before the trend potentially resumes. A bullish hikkake forming below the moving averages is a counter-trend reversal attempt, which carries higher risk. Identifying which type of setup applies before entering can help traders adjust position sizing and targets accordingly.
Bollinger Bands®
Bollinger Bands® identify volatility extremes and mean-reversion tendencies. A false breakdown that extends to or briefly below the lower Bollinger Band®, then reverses back inside the band, combines the hikkake's false-breakout logic with the bands' mean-reversion indication. When price closes back inside the lower band after a brief move below it, the combination of the hikkake structure and the Bollinger Band® signal may support the case for a bounce. Conversely, a false breakout above the upper Bollinger Band® that quickly reverses back inside it can reinforce a bearish hikkake setup, with the band breach suggesting a volatility extreme that the move failed to sustain. This convergence of signals may be particularly useful when the inside candle forms near the lower or upper band.
Discover more indicators on our technical analysis page.
Hikkake pattern vs inside candle pattern
The hikkake and the inside candle are closely related – the hikkake is built on an inside candle foundation. However, they signal different things and should not be confused.
| Comparison point | Inside candle | Hikkake pattern |
|---|---|---|
| Structure | Mother candle + inside candle (two candles) | Mother candle + inside candle + false breakout + reversal (four or more candles) |
| Signal | Potential breakout in either direction from the inside candle's range | Reversal of a false breakout from the inside candle's range |
| Entry | On a break of the inside candle's high or low | On the reversal back through the opposite boundary of the inside candle |
| Direction | Trade in the direction of the breakout | Trade against the direction of the initial breakout |
| Context | Neutral – requires directional confirmation from the breakout | Contrarian – the setup itself provides the directional information |
The inside candle trader enters on the first break of the inside candle's range, anticipating a continuation in that direction. The hikkake trader waits for that break to fail and then enters in the opposite direction. A trader who enters a standard inside candle breakout and sees the move fail has, in effect, found themselves on the wrong side of a developing hikkake pattern. Understanding the hikkake means understanding both the inside candle setup and when that setup fails.
Hikkake pattern chart examples
The following examples illustrate how the bullish and bearish versions of the hikkake can play out in market contexts, including the entry trigger, stop placement and subsequent price behaviour.
Bullish hikkake in an uptrend
On a daily chart of a major equity index in an uptrend, a consolidation forms over two to three days as price compresses. An inside candle develops with a range of 18 points from high to low. On the following day, price breaks below the inside candle's low by 6 points, appearing to confirm a bearish breakout. Momentum traders short the breakdown. The next session, price reverses and closes back above the inside candle's low, then the following day breaks above the inside candle's high, triggering the hikkake entry at that level. The stop is placed below the low of the false breakdown candle. Price then advances 42 points over the next five sessions – more than double the mother candle's range – as trapped short positions are covered and buyers add to their positions.
Past performance is not a reliable indicator of future results.
Bearish hikkake at resistance
On a four-hour chart of a currency pair, price has been in a downtrend and a brief consolidation forms with an inside candle. Price breaks above the inside candle's high, appearing to signal a bullish breakout above recent resistance. Within two candles, price closes back below the inside candle's high and then breaks below the inside candle's low, triggering the bearish hikkake entry. The stop is placed above the high of the false breakout candle. The subsequent move carries price 70 pips lower over the following sessions, consistent with the resumption of the prevailing downtrend.
Past performance is not a reliable indicator of future results.
Common mistakes when trading the hikkake pattern
The most common errors when trading the hikkake pattern stem from rushing the entry, misidentifying the key candles in the sequence, or applying the pattern without regard for the broader trend context.
- Entering too early: a hikkake trade needs a failed breakout, not just an inside candle breakout. Entering on the breakout candle can leave traders exposed if price quickly reverses.
- Misreading the false breakout: stop-loss placement can depend on identifying the candle, or candles, that broke beyond the inside candle before price reversed. Getting this wrong can make the stop too tight or too wide.*
- Trading against strong momentum: counter-trend hikkake patterns can fail if the breakout is actually a continuation move. Some traders use a trend filter, such as a 50-day or 100-day moving average, to screen signals.
- Ignoring price structure: the pattern may carry more weight near support, resistance, swing highs or swing lows than in the middle of a range.
- Trading the setup mechanically: the hikkake works best when considered alongside trend, volatility and broader market context, rather than as a standalone signal.
*Standard stop-loss orders aren’t guaranteed. Guaranteed stop-loss orders incur a fee if activated.
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FAQ
What is the hikkake pattern?
The hikkake pattern is a price action formation that identifies a false breakout from an inside candle, followed by a reversal in the opposite direction. It consists of a mother candle, an inside candle, a false breakout of the inside candle's boundary, usually in one to three candles, and a subsequent reversal back inside the range. The pattern signals that traders who entered on the initial breakout may be trapped, and that the subsequent reversal could carry momentum as those positions are closed. The word 'hikkake' is Japanese for 'to trick' or 'to ensnare'.
How is the hikkake pattern different from an inside candle?
An inside candle is a candle whose range is contained within the range of the preceding candle. The inside candle trade involves entering in the direction of a breakout from that range. The hikkake uses an inside candle as its foundation but signals the opposite: it identifies when the initial breakout from the inside candle fails and reverses, providing an entry signal in the direction opposite to the initial failed breakout. A trader taking a standard inside candle breakout can find themselves on the wrong side of a hikkake if the breakout quickly reverses.
Is the hikkake a bullish or bearish pattern?
The hikkake can be either bullish or bearish. A bullish hikkake occurs when the initial false breakout is to the downside: price breaks below the inside candle's low, fails to sustain the move, reverses back inside the range, and then breaks above the inside candle's high, signalling a potential move upward. A bearish hikkake is the mirror image: a false breakout to the upside that fails and reverses, signalling a potential move downward.
Where do you place the stop-loss on a hikkake trade?
The standard stop-loss for a hikkake trade is placed beyond the extreme of the false breakout candle – the candle that temporarily broke outside the inside candle's range before reversing. For a bullish hikkake, following a false breakdown, the stop is placed below the low of the false breakdown candle. For a bearish hikkake, following a false breakout to the upside, the stop is placed above the high of the false breakout candle. Standard stop-loss orders are not guaranteed. Guaranteed stop-loss orders incur a fee if activated.
What timeframes work best for the hikkake pattern?
The hikkake pattern can appear on any timeframe, from intraday charts to weekly charts. Higher timeframes, such as daily and weekly charts, can produce signals that are easier to read because the inside candles and false breakouts reflect broader price behaviour. Intraday hikkakes, on 15-minute or one-hour charts, are more frequent but can be noisier and more prone to failure. Many traders who use the hikkake as a primary pattern focus on daily, four-hour, or one-hour charts, where the pattern's structure is often easier to identify.
What is a failed hikkake?
A failed hikkake occurs when the pattern triggers – price re-enters the inside candle's range after the false breakout – but then reverses again and continues in the direction of the original apparent breakout rather than completing the expected reversal. A correctly placed stop-loss can help limit the loss in this scenario. Some traders use a confirmed failed hikkake as a secondary signal: if the bearish hikkake, or false upside breakout, fails and price continues upward, the strength of that upward move may suggest that the original breakout was genuine, providing a possible second entry opportunity in the original direction.
