Mat Hold Candlestick Patterns Explained: What They Are & How To Trade Them

 

What Is a Mat Hold Pattern?

A mat hold pattern is a 5-candlestick formation that may signal a continuation.  It is made up of a large candlestick moving in the direction of current trend, followed by a gap and three shorter candles that move against trend but do not close beyond the open of the first candle, then another large candle that closes beyond all prior candles in the direction of trend.

The mat hold has both bullish and bearish variations.  It is also very similar to the three methods pattern.  Both include three smaller candles sandwiched between two drives in the direction of trend.  These three smaller candles represent a short period of consolidation before the trend continues.

Of course, no candlestick pattern guarantees a particular outcome.  Instead, they offer clues as to what is going on in the market.

So the question is, what does a mat hold really tell you?

What Mat Hold Patterns Mean

Like many candlestick patterns, the name itself doesn’t reveal much.

And unlike some, English speakers do not use the Japanese name for it.  We could not find any information about where the name comes from.  We thought it might be named after a sumo technique, like the belt hold candlestick but found nothing.

(If you know the true meaning, please leave it in the comments below).

In trading terms:

• During the first period, the price drove strongly in the direction of trend.
• The second period opened with a gap that got filled over the course of the next three periods as price moved against trend but never closed beyond the open of the first period.
• During the fifth period, price resumed and exceeded the movement of the first period.

This sets the stage for continuation, as countertrend pressure failed to materialize.

How To Recognize Mat Hold Candlestick Patterns

Traders are attracted to patterns partly because they are easy to spot.

However, it’s also easy to see things on the charts that aren’t truly there (or anticipate events that never come to fruition).  That’s one of the reasons why waiting for confirmation is so important.

Technically, a mat hold pattern must:

• Begin with a long candle moving with trend
• Have a gap in the direction of trend after the first candle that gets filled over the course of the next three candles
• Have three consecutive short candlesticks after the first candlestick, that move against trend
• Not have any of the middle candles close beyond the open of the first candle
• End with another long candle moving with trend, that closes beyond the body and wicks of all prior candles in the pattern

In practicality though, many traders will make various exceptions.

• The first candle doesn’t necessarily have to be a long candle, as long as none of the smaller candles close beyond the first candle’s open.
• The middle three candles don’t all have to be short candlesticks and move against the trend, as long as none close beyond the open of the first candle.
• The gap can go, especially in markets where gaps are less common like cryptocurrency.
• The final candle doesn’t necessarily have to close beyond all the wicks of the prior candles, as long as it closes beyond the bodies.

Depending on who you ask, any of these standards may be more or less important.  Moreover, some of these variations may be more properly classified as other continuation candlestick patterns, such as the three methods.

Remember, identifying the continuation itself is more important than labeling the formation.  That’s not to say these standards are completely unimportant (as we’ll touch on shortly).  It’s just to say that the implications are more important than the criteria.

In other words, you need to put it into context.

Where Mat Holds Fit in the Chart Narrative

The markets are often characterized as a battle between the bulls and the bears.

Mat hold patterns show that one side attempted to press their advantage on candle one (and between candles one and two), stalled for the next three candles, before finally regaining control and pressing trend further by the end of the fifth candle.

On the chart, it looks like a one-sided beatdown.

It might happen like this on a daily time frame:

After a strongly trending day, traders awoke the next day to a price gap.  Those on the side of trend took profits, expecting strong counter-trend pressure.  Over the next three days, that pressure materialized but was not strong enough to do any meaningful damage.  On the fifth day, those on the side of trend re-entered their positions and pushed price well beyond the trading range of the last few days.

In the short-term, it amounts to a near-knockout blow.

The question traders need to ask themselves is, “Can the opposition mount a defense or is this the precursor to an even larger move?”

To answer that question, you’ll need more than just an understanding of Japanese candlesticks and candlestick patterns.  You’ll want to analyze both within the context of greater chart patterns as well as trend and price levels.  You’ll also want to make use of your own chart markup and indicators.

Analyze the history of your preferred asset(s) with respect to mat hold patterns and apply it to your own trading style.

Now, you can test (and/or stretch) the criteria we mentioned above to find the most tradeable opportunities.  For example, you may find that mat holds that end with a marubozu candlestick play out more reliably than those that don’t.  Or, you may find the opposite.

Here is where the story in the charts begins to come into focus.

This is what we call technical analysis.

How To Trade Mat Hold Patterns

Continuation points are great places to add to your position or adjust your stop loss.

Mat hold patterns serve as easy-to-spot signs of potential continuation that may serve as a launchpad for the next big leg up or leg down.

Generally, you can put more weight into multi-stick patterns than single candles.  They give you more information over a longer amount of time.  Still, it is considered unwise to trade based on candlestick patterns alone.  They rarely have extremely high hit rates by themselves.

You need additional points of confluence to shift the probabilities in your favor.

Some of the more important ones include:

• Volume – Conventional wisdom says that elevated trading volume on the first and last candles of a mat hold increases the likelihood of continuation.  You might even look for it just after.
• Price Formations – Continuation patterns like mat holds tend to perform better when there is thin support or resistance in their way.  If it’s a blue sky breakout, even better.
• Matching Momentum – Oscillating indicators like the RSI or stochastics are commonly used to identify continuation by analyzing slope, percentile, and/or divergence.

The fewer such factors corroborating the continuation, the less confident you can be about it.

It would be difficult to form a comprehensive trading strategy around mat hold patterns.  There simply isn’t enough there to develop a strong edge.  Even with a great understanding of trading math, orders, psychology, risk management, options, and automation, you’d still have a hard time.

You’re much better off building your strategy around other tools then using continuation patterns as an additional point of confirmation.

Patterns like the mat hold are much better idea givers than trade makers.

Other Candlestick Pattern Types

The mat hold is but one of many candlestick patterns.

You’d be wise to get familiar with all of the other ones too.

• Abandoned Baby
• Breakaway
• Counterattack Lines
• Doji Star
• Engulfing
• Harami
• Harami Cross
• In Neck
• Kicking
• Ladder
• Last Engulfing
• Matching
• Meeting Lines
• On Neck
• Separating Lines
• Star
• Stomach
• Tasuki Gap
• Three Inside
• Three Methods
• Three Outside
• Tweezer
• Window

Sure, there are quite a few of them.  But don’t let that intimidate you.

It’s unnecessary to memorize all the names and criteria for every pattern.  What’s more important is to learn the principles of price action and technical analysis.

In fact, you’re free to forget all of the names and specifications as long as you can look at a group of candlesticks and understand what they are trying to tell you.

Takeaways

To review:

Mat holds are a type of candlestick pattern that signals a potential continuation.  While not a guarantee, their appearance may indicate that market conditions are going to remain the same.  Thus, they can help you find winning trades.

Of course, there are other candlestick patterns that you should learn about.  And even so, the ability to recognize patterns is not enough to trade successfully on its own.

Nonetheless, you’ve now added one more tool to your toolkit.

Have questions or more information to add?  Contribute to the conversation in the comments below!  Or, if you know someone who could benefit from this post, share it with them.  You can also check out our Candlestick Patterns Guide to improve your candlestick analysis skills.