There are many parameters that you can take into account in trading. In addition to technical and fundamental indicators, you can also see price action patterns through candlesticks or candlestick charts.
One candlestick pattern that you can use as a reference is the morning star candle and the evening candle.
A candlestick is a chart shaped like a candlestick that is usually red or green on the trading application screen. This chart pattern can be used as a benchmark in trading. Because in addition to moving according to the current price trend The candlestick also provides information on the volume of demand for the asset in real time. with you can Predict whether the price trend will go up or down. and get in and out at the right time
Here is a complete discussion of the Rising Star and Rising Star candlestick patterns.
Morning Star candlestick pattern
The Morning Star is a candlestick pattern consisting of 3 candles A, B and C. Candle A is a red or black candle sticking downward, B is a candlestick and is slightly further from A, while C. Is it a white or green candlestick?
Here is an example of a Morning Star candlestick:
according to the information shown in the picture The Morning Star candlestick pattern can appear due to a change in power that drives the price of an asset from being dominated by sellers (bears) on the previous black candle to being dominated by buyers (bulls). on a white candle
Therefore, this pattern enters a reversal pattern. especially the reversal of the uptrend That is, a market that started to go down as more traders sold their assets turned into a bull market as demand for these assets grew stronger.
Dusk candlestick pattern
The opposite of the Rising Star pattern is the Rising Star candlestick pattern. The evening star pattern also consists of 3 candles. The first candle (A) is white or green. then followed by a doji and is black or red C
The candlestick pattern in the evening indicates a shift in power between the buyers who used to dominate the market and the sellers (bears) that are starting to strengthen. The doji in the middle shows that both the bull market and the bear market are both strong. Therefore, the market still determines where the price action will continue.
This can happen if several previous buyers of these assets made a profit. This results in a lot of selling. Therefore, the evening star candlestick pattern is a bearish reversal pattern.
Both the morning star and the evening star candlestick patterns can occur at any time and on any time frame. Therefore, it is important for traders with any type of trading to be aware of these two candlestick patterns.
Steve Nison, a technical analysis expert from the United States, said that candlestick patterns can be called Morning Star and Evening Star if:
- There is a gap between the first and the second candlestick. This gap may be less noticeable in the forex market, as forex is the most liquid tool in the world. As long as the second candlestick is smaller than the first, Nison said, is enough
- The size of the third candle must be at least half the size of the first candle. The goal is for traders to know if there is a reversal or not. So, assuming the closing price range at A is 30 pips, then the price range closes at C at least 15 pips.
How to trade with Morning Star and Evening Star Patterns
1. Use another indicator to verify.
One of the disadvantages of the above two candlestick patterns is that they often give traders false signals. This can happen if it turns out that the power of the buyer (Bull) cannot raise the market price or the power of the Bear (Seller) cannot bring the market price down further. Combine these two formats with Other candlesticks for a more comprehensive analysis
Therefore, it is important for traders to use another indicator for confirmation. One indicator that you can use is the indicator. Relative Strength Index (RSI), stochastic oscillator or Average direction index (ADX)Because these three technical indicators can help you gauge the strength of current or future trends. And it allows you to see the condition of the buying power of the bulls and the selling power of the bears in the market.
2. Look at the quantity
In addition to using other indicators, you can also see the strength of the market reversal by looking at the volume of transactions. The size of this transaction volume is clearly reflected in the candle itself. The longer or thicker the candlestick is. The chances of a bullish or bearish market in the background are also larger.
So when you find this pattern on the trading charts You should wait for the volume of the third candlestick to touch at least half of the first candlestick. This way, you can at least have a little confirmation if the morning star or dawn pattern has occurred.
3. Set entry and exit points
In fact, you can buy goods at a low price and sell them at the highest price, however, this does not apply to trading using the morning and evening star patterns. As it is again possible that these two candlestick chart patterns are showing fake signals.
Therefore, you should open an entry position when the length of the third candle is more than half of the first candle. and open positions with market orders so that you can buy the asset at the current price level.
when considering when to leave You should do a little research on how long these two candlestick patterns will last. You should also know that. reversal pattern other so when the pattern appears show that you are ready
This exit also includes cutting losses. This is because it is not uncommon for the unexpected to happen that makes the duration of the trend shorter than usual. Therefore, loss cutting is required to prevent further losses. You can use the risk-reward ratio to determine this stop loss point.
The Morning Star and Evening Star candlestick pattern is a reversal pattern consisting of 3 candles which The second candle must be in the shape of a doji.. Both of these patterns can appear in any time frame and on any asset trade.
The downside is that Morning Star and Evening Star candles often give false signals. Therefore, traders inevitably take advantage of this pattern along with other technical indicators.
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