We’ve illustrated the evening star pattern in the image below. Another approach is the conservative one, in which traders wait for a correction before opening the buy trade. In that case, they can open a buy trade from a 30% or 50% correction of the third candle’s body instead of buying from the candle’s high. The above image shows the price moving downward and reaching a horizontal support level. We can therefore say that the price may have found a bottom.
They are best when validated by other methods such as technical indicators and trading strategies. Most traders will not secure a buy position until they have proof of the new uptrend. When you have a large-bodied bullish candlestick, you know the price is increasing as well as buying https://www.bigshotrading.info/ participation. When a large-bodied bearish candle forms, you know the price is decreasing and there is selling pressure. If a candlestick body is smaller, the modest move in price can inform traders that there may be a brief stall in trend and a possible reversal to follow.
Formation of a large bullish candle
A Morning Star pattern does not require difficult calculations and it allows traders to spot bullish trend reversals in their early stages. Another essential aspect is volume contributes to the formation of Morning Star. The high volume on the third candle is seen as a bullish pattern, regardless of other technical indicators. It shows bears are still in control, but they are not pushing the price lower. If the second candle is bullish, this is a sign of a more definite reversal.
- The color of the candle solely depends on how the buyers and sellers of the stocks settle for at the end of the day.
- As the Morning Star is a three-candle pattern, traders often don’t wait for confirmation from a fourth candle before they buy the stock.
- A morning star is a visual pattern, so there are no particular calculations to perform.
- The high volume on the third candle is seen as a bullish pattern, regardless of other technical indicators.
- The third candle confirms the reversal and can mark a new uptrend.
If you’d like a primer on how to trade commodities in general, please see our introduction to Morning Star Candlestick Pattern commodity trading. The bearish equivalent of the Morning Star is the Evening Star pattern.
What does the Morning Doji star mean?
It is aptly called a morning star because it appears just before the sun rises . After a long red body, we see a downside gap to a small real body. This is followed by a green body that closes above the midpoint of the red body made just before the star. The morning star is similar to a piercing line with a “star” in the middle. When found in a downtrend, this pattern can be an indication that a reversal in the price trend is going to take place. What the pattern represents from a supply and demand point of view is a lot of selling in the period of the first black candle.