The hikkake pattern has become a popular tool for technical traders thanks to its relatively simple setup, and the fact that it typically indicates a short-term move in prices. This pattern is used to gauge a current or expected trend in the market, typically during an uptrend or a downtrend. The hikkake pattern is based on the principle of failed reversals, which occur when the price action retraces at a certain point, and then reverses direction when it seems most traders have already entered the market expecting it to continue in the same direction.

The hikkake pattern comes in two variants: the hikkake bullish pattern and the hikkake bearish pattern. On a chart, the hikkake bullish pattern typically looks like an "M" pattern, with price action culminating in a shooting star or a doji. Conversely, the hikkake bearish pattern looks much more like a "W", with the price action climaxing with a hammer or a doji.

The hikkake pattern is typically used to identify a minor reversal in the market, and so traders may look for this setup to help identify possible stop-loss points, target levels, and entry points. Traders will typically consider a hikkake pattern broken if the price action breaks above the swing high of the second leg of the “M” or “W” pattern. Likewise, a trader may consider the hikkake pattern failed if the price action closes below the swing low of the second leg of the pattern.

The hikkake pattern works well in markets with a significant amount of psychological factors driving price action. However, traders should always use caution when entering any trade based on this, or any other technical pattern. As trading is unpredictable, there is no guarantee that a hikkake pattern will yield an accurate entry or exit signal. Additionally, like all technical analysis tools, the hikkake pattern should be used as part of an overall trading strategy and should not be relied on as a sole source of trade decisions.