32.How to Trade the Morning/Evening Star Candlestick Pattern

http://www.informedtrades.com/
A lesson on how to trade the morning and evening star candlestick chart patterns for active traders and investors using technical analysis in the stock, futures, and forex markets.

In our last lesson we looked at the Hammer and Hanging Man Candlestick Chart Patterns. In today's lesson we are going to look at two more reversal candlestick patterns which are known as the Morning and Evening Star.




The Morning Star

Pic

The Morning Start Candlestick Pattern is made up of 3 candles normally a long black candle, followed by a short white or black candle, which is then followed by a long white candle. In order to have a valid Morning Start formation most traders will look for a close of the third candle that is at least half way up the body of the first candle in the pattern. When found in a downtrend, this pattern can be a powerful reversal pattern.

What this represents from a supply demand situation is a lot of selling into the downtrend in the period which forms the first black candle, then a period of lower trading but with a reduced range which forms the second period and then a period of trading indicating that indecision in the market, which is then followed by a large up candle representing buyers taking control of the market.

Unlike the Hammer and Hanging Man which we learned about in our last lesson, as the Morning Star is a 3 candle pattern traders often times will not wait for confirmation from the 4th candle before entering the trade. Like those patterns however traders will look to volume on the third day for confirmation. In addition traders will look to the size of the size of the candles for indication on how big the reversal potential is. The larger the white and black candle and the further that the white candle moves up into the black candle the larger the reversal potential.

Chart


The Evening Star

The Evening Star Candlestick Pattern is a mirror image of the Morning Star, and is a reversal pattern when seen as part of an uptrend. The pattern is made up of three candles the first being a long white candle representing buyers driving the prices up, then a short white or black second candle representing indecision in the market, which is followed by a third black candle down which represents sellers taking control of the market.

The close of the third candle needs to be at least half way down the body of the first candle and as with the Morning Star most traders will not wait for confirmation from the 4th period's candle to consider the pattern valid. Traders will look for increased volume on the third period's candle for confirmation, the larger the black and white candles are and the further the black candle moves down the body of the white candle the more powerful the reversal is expected to be.

Chart Example

That's our lesson for today. In our next lesson we are going to finish up our series on Candlestick patterns with a look at the Shooting Star and Inverted Hammer Candlestick Patterns.

Category:

Howto & Style

Tags:

• howto
• trade
• candlestick
• morningstar
• eveningstar
• daytrade
• investing
• money
• forex
• futures
• stockmarket
• informedtrades

[laton0]

for me is the best strategy price action based on candles formation. forget indicators just keep focused on eur/usd 15m tf on candles reversals you may be succeed.

[InformedTrades]

Hey Laton, This is a good method of trading and you can be very successful with price action and no indicators. That is how I personally trade.

-Brendan

[bagga786]

good video, well explained the morningstar

[InformedTrades]

Hi, Thanks for the comment and for watching I am glad you liked it. Best Regards, Dave

[djohnsonhot]

Very good commentary and great video's with the charts to back it up!!!

[InformedTrades]

hi djohnsonhot, Thanks for the comment am glad you like it. Best Regards, Dave

[laton2010]

@InformedTrades 1HR TIME FRAME IS THE BEST

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[edwardwills]

I use the 2 day 10 minute candle, what does everyone else use?

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