Morning Star Candlestick

reversal candlestick

This pattern indicates that sellers have failed, and buyers are now in market control. From a morning star pattern, traders should look to open long positions. In a morning star pattern, the small middle candle is between a large bullish candle and a bearish candle. This pattern appears at the bottom of a downtrend and signals that the trend is reversing and heading upwards. When you spot the pattern at a support level, you can use momentum oscillators like stochastic or RSI to confirm the reversal signal.


Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Morning Star is a bullish trend reversal candlestick pattern consisting of three candles. Without these confirmations, they argue it is too risky to trade alone on a morning star pattern. An easy way to learn everything about stocks, investments, and trading.

Identify a Morning Star Candlestick Formation

The morning star pattern is very simple to identify on the price chart if you are an intermediate trader. Even beginners can spot it easily on the chart with little practice. The pattern gives us well-defined entries and good risk-reward ratios.

If there is no supporting evidence of a strong bullish trend, then you might need to re-analyse your chart. However, in fast-moving markets like forex, this can prove to be dangerous. In this situation, the trader might take a wrong entry at a much higher price level which would cause losses or very limited returns. The occurrence of a morning star pattern may not be a frequent one in the stock market.

The balancing home and work of this bar is greater than the volume of the previous bar. I’d like to view’s products and services that are most suitable to meet my trading needs. Keep in mind all these informations are for educational purposes only and are NOT financial advice. You can also try out trading risk free – and give our award-winning platform a test drive – with a demo. This shows that supply and demand are equal, and the bears and the bulls are fighting for control. Our gain and loss percentage calculator quickly tells you the percentage of your account balance that you have won or lost.

But in many other cases, the pattern fails to give successful results. The chart graphic shown above has given a model of how the Morning Star trading approach begins. The most important aspect of the formation is the middle Morning Star candle because it indicates a period of indecision required for a reversal. Using live charts, we can see how the Morning Star formation can often signal major rallies in the underlying price of an asset. All ranks are out of 103 candlestick patterns with the top performer ranking 1. «Best» means the highest rated of the four combinations of bull/bear market, up/down breakouts.

  • The second line may be any white or black candle appearing as a short line, except the doji candles.
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  • Similarly when the price reaches the lower line of the Bollinger band, that is often a good time to look for buying opportunities.
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  • The third candle confirms the reversal and can mark a new uptrend.

Typically this retracement will be a 38 to 50% retracement level. The logic here is that the market should subside a bit following the Morning Star formation, providing a better entry for the long position. The three black crows is a 3-bar bearish reversal patternThe pattern consists of 3 bearish candles opening above the… An engulfing pattern is a 2-bar reversal candlestick patternThe first candle is contained with the 2nd candleA bullish…

An Example of How to Trade a Morning Star

However, we prefer to use some sort of quantifiable filter or condition, to know for sure that the market has entered oversold territory before we take a signal. And the filter we’re going to use for this strategy example, is the Bollinger bands indicator. The market gaps up, and more people turn bullish, wanting to get in in anticipation of the next uptrend. As such, buying pressure increases and makes it harder for bears to continue pushing prices lower.

Of course, such a support zone may not be noticeable until after the fact unless there is additional support hidden to the left of the chart. Identifying the morning star candlestick pattern on forex charts involves more than just identifying the three main candles. What is needed is a knowledge of previous price action and where the pattern appears within the existing trend.


Value investors or traders that are looking to “buy the dip” can benefit from these events when long trades are initiated. Morning Star patterns often include a Doji candlestick pattern in the second position, which should not be surprising because this is an indicator of market indecision. Look for the morning star candlestick to appear in a downward retrace of the primary uptrend for the best performance — page 603. It acts as a bullish reversal frequently enough that I consider it reliable.

Morning Star Candlestick Pattern is one of the most used technical analysis tool by technical analyst. Referring to the far right of the price chart you can see when that event occurred, which would have taken us out of the position, resulting in a profitable trade. That is to say that the exit signal would occur when the price closes back below this centerline of the Bollinger band. Now with these conditions met, we can focus on executing a long entry on this currency pair.

The Difference Between a Morning Star and a Doji Morning Star

The closing price of the second small candle may be higher than the opening price or lower than the opening price. As can be seen in the above two diagrams the MorningStar candlestick pattern is a combination of three candlesticks. A large red first, then a small green or red candlestick, and the last one is a large green candlestick.

Traders observe the formation of a morning star pattern on the price chart. They then can confirm it with their other favorite technical tools . Morning star is a powerful candlestick pattern, and most price action traders use it in their trading strategies.

However, after a tug-of-war and a period of uncertainty, the bulls successfully took over. The Morning Star candlestick pattern is the opposite of the Evening Star, which is a top reversal signal that indicates bad things are on the horizon. Scan candlestick charts to find occurrences of candle patterns.

As prices move higher following the second swing low, we can see a third test of the key support level. And this third test results in the formation of the Morning Star pattern. Because of this, we would favor an upside reversal and expect the key support level to hold. As expected, the price begins to rise following the completion of the Morning Star formation. Traders often look for signs of indecision in the market where selling pressure goes down and leaves the market flat. This is where Doji candles can be seen as the market opens and closes at the same level or very close to the same level.

Supporting documentation for any claims, comparison, statistics, or other technical data will be supplied upon request. TD Ameritrade does not make recommendations or determine the suitability of any security, strategy or course of action for you through your use of our trading tools. Any investment decision you make in your self-directed account is solely your responsibility. After getting confirmation the trader enters the stock in the fourth candle.

The Stochastics indicator is a popular oscillator that provides oversold and overbought readings based on a default look back period of 14 days. The Stochastic oscillator has two primary lines, the faster percent K line which is more sensitive, and the slower percent D line which is less sensitive. In this section of the article, we wanted to show you a couple of filters that we have had great experiences with when it comes to improving trading strategies. Experience our trading platform for 90 days, risk-free. Or if you’re ready to risk real capital, open your live account. If there is a gap on both sides of the Star candle, the probability of a reversal is even higher.

But the formation is different, and hence, a careful analysis is required. A trader may observe a bullish gap up and it is easy to watch how the bulls pull the price of the security upwards. This is how they may often erase the losses which may have occurred on day 1 of the trade.

Morning Doji Star

A morning star is a three-candle pattern with the low point on the second candle. However, the low point is only apparent after the close of the third candle. A morning star is a visual pattern, so there are no particular calculations to perform. However, it is always advisable to take a look at the fundamentals as well while taking positions. Any small candle in the downtrend might be mistaken as a morning star.

When using with the morning star, you could go about in several ways. One of the most universal concepts there is in trading, is volatility. The behavior and characteristics of a market vary greatly depending on the current volatility level. For example, you may find that some patterns only work in either high or low volatility environments. When the market comes from the bearish trend, most market participants believe that it’s going to continue down.

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