Morning Star Pattern: What Is It and How To Trade It?

The appearance of an Evening Star indicates that the bullish trend is losing steam and could be turning bearish. In a traditional morning star reversal pattern, morning star forex the candle that appears in the middle of the formation has a small real body, meaning there is a clear difference between the opening and closing prices. This pattern can be used in various timeframes and currency pairs, making it suitable for different trading strategies and styles.

Generally, a trader wants to see volume increasing throughout the three sessions making up the pattern, with the third day seeing the most volume. High volume on the third day is often seen as a confirmation of the pattern (and a subsequent uptrend) regardless of other indicators. Also, the third candlestick is asked to close below 50 percent of the body of the first white candle. The Morning star is a visual pattern that is spotted out by the traders easily.

• Trendlines are simple but effective tools for identifying the overall direction of the market.
• He is the authority on candlesticks, and I would recommend his courses to any trader interested in a deeper understanding of them.
• One of the best ways to trade the Morning Star Pattern is by using it alongside support levels to conduct a clear analysis.
• The Morning Star Pattern is a valuable tool for identifying bullish reversals in forex and stock markets.

Take Profit Targets

The morning star consists of three candlesticks with the middle candlestick forming a star. The Evening star is the reciprocal of the Morning star, and even more so, when trading pairs in the Forex market, or any pair, for that matter. In this case, the Japanese linked this formation with the Venus planet, as the precursor or the night. It is created when a long white candle is followed by a small body and a large black candle. Traders based on indicators may use the Morning Star when it is produced at the Supply/Support zone. Moving Average, RSI, Bollinger Band, Parabolic SAR indicate Supply/ Support zone.

Should You Trade the Morning Star Candlestick Pattern?

Both patterns appear during a downtrend and can shift the market to a move higher. When you spot a morning star pattern, like the one in the chart above, it can strongly indicate a bullish reversal, primarily when supported by additional confirmations and technical indicators. Candlestick charting is a famous method traders have been using to analyse financial markets. Professional traders prefer the morning star Japanese candlestick pattern due to its distinct shape and ability to predict reversals.

Some of the instances would be identifying the price action providing support or the relative strength indicator showing the excessive sales of that very stock. A Morning Star pattern takes three trading days to fully form, consisting of a bearish candle, a small-bodied candle, and a bullish candle. The morning star and evening star patterns can be considered mirror images of each other in terms of outlook, with each pattern signalling a reversal but in opposite directions. It is a three-candle price action, often indicating a bullish reversal in the market.

As you can see in the below image, the overall trend of the CAD/CHF Forex pair was down. Like the pinbars, 50% of the total range of the third candle is a good target, or even 50% of the real body of that candle works well. If you would have entered the trade after price pulled back near the 50% mark of the outside (third) candle, you could have made more than 3x your risk. On JForex, you can set your entry, stop-loss, and take-profit levels using the “Orders” panel. Right-click on the chart at your desired level, select “Set Entry,” and adjust your stop-loss and take-profit as needed.

This is a strong bullish signal, but the length of the third candle has diluted the risk to reward potential on this trade (assuming you were planning on entering at the open of the next candle). To make things worse, the second candle in the morning star pattern was a dragonfly doji. The long lower wick of this doji means an even lower risk to reward scenario, yet it is a slightly bullish signal.

The Forex Morning Star Pattern is a bullish reversal pattern that appears on a candlestick chart after a downtrend. Traders can identify the pattern by looking for a long bearish candle, a small bullish or bearish candle, and a long bullish candle. By understanding and using the Forex Morning Star Pattern, traders can increase their chances of making successful trades in the volatile forex market. The morning star reversal pattern reflects a shift in market sentiment from bearish to bullish. The second candle, with its small body, suggests indecision as the market stabilises and neither bulls nor bears dominate.

• The day ends with a close that wipes most of the gains of the first white candle, that shows that the control is in the hand of sellers.
• A Morning Star pattern is a bullish reversal pattern that consists of three candlesticks.
• In this trade, we hold our positions because we took the trade from the beginning of a new trend.
• A morning star candlestick pattern is a three-candle formation used in technical analysis by traders to identify bullish reversals.

In this article, we will discuss how to identify Morning Star patterns and use them for profitable forex trades. How to Identify Morning Star Forex Patterns for Profitable TradesForex trading is a highly popular and lucrative market where traders buy and sell currencies to make a profit. To succeed in forex trading, one needs to have a good understanding of technical analysis and the ability to identify patterns that can indicate potential profitable trades…. Morning star is a bottom reversal pattern, and it primarily consists of three candlesticks that indicate the bullish sign.

It is the preferred pattern among all kinds of traders from price action traders to traders based on indicators. It is important to note that not all Morning Star patterns are equally reliable. Some patterns may fail or result in a minor retracement rather than a full-blown reversal. Therefore, it is crucial to practice proper risk management and set appropriate stop-loss levels to protect your capital. The RSI is a momentum indicator that is commonly used to measure both the speed and change of price movements. It helps identify overbought or oversold conditions adding another dimension to your fundamental analysis.