Trading the Morning and Evening Star Candlestick Patterns
Both the morning and evening star patterns are considered more complex formations, mainly because they are based on three consecutive candles. As such, they occur less frequently than other patterns, especially the one-candle formations
Structures :-
The morning star is a bullish reversal pattern that occurs at the end of a downtrend. Like other candlestick patterns, it merely signals a possible reversal, which should ideally be confirmed by other indicators
Four elements to consider for a morning star formation :-
1 - There must be a downtrend as a morning star is a bullish reversal pattern
2 - The first candle should be a bearish candle, preferably longer
3 - The second candle should be indecisive, as the bulls and bears balance each other out during the session
4 - The third candle should be a strongly bullish candle, which practically confirms the reversal pattern
Although some analysts favour a gap down, gaps are extremely rare in Forex. Therefore, many analysts believe that it is a valid morning star pattern as long as these four conditions are met
It is important to note that the second candle is the most important. It can be either bearish or bullish, as the focus is on indecision and the uncertain outcome of which of the two sides will come out on top.
The Evening Star formation :-
The evening star, on the other hand, has the same structure and is also a reversal pattern. Unlike the morning star, the evening star occurs at the top of an uptrend and signals a possible change in price direction.
All four conditions present in the morning star structure apply here as well. Towards the end of an uptrend, the first candle should be long and bullish, the second candle should be at the top and signal indecision (green or red), while the third and final candle signals the beginning of a reversal as buyers are no longer in control.
Trading the Morning Star Candlestick Pattern
As mentioned earlier, the occurrence of a Morning Star pattern is not as common as that of a single candlestick formation. They are more difficult to detect, apart from the fact that you need to meet practically all four conditions before you can verify the presence of such a pattern
In this case, we have the Nifty- one hour chart. The price had gone down to the point where it formed a new short-term low. Before this candle, there is a long bearish candle that signals a strong downtrend.
However, the sellers fail to force a close near the session low, and the price bounces upward, creating a doji candle that signals indecision among buyers and sellers. The next candle is a long bullish candle forming the morning star pattern. We can now be almost certain that the bullish trend reversal will begin soon.
Trading the Evening Star pattern example
Important note :-
Did you follow Risk Management today?
Did you follow Money Management today?
Did you put Stop Loss today?
Was there control over emotions today?
Did you follow the same setup today?
Did you believe in yourself while taking the trade?
Did you stop yourself from trading over trade
today?
Did you wait for the right Opportunity today?
We do not have to invest money in the share market by taking loan or borrowing from anyone.
We will take the same risk that even after losing it does not affect our family life.
We will never trade with half knowledge.
We will never risk more than 2% of our total capital in a single trade!
Always trail Stop loss. Do not place a target. Enjoy a full rally.
The one who understands the value of time will become a good trader.
Did you learn anything new today?
If all these rules are followed then you can become a successful trader. Otherwise all setup, all strategies are useless.
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