Prices are always gyrating, so the sellers taking control for part of one period—like in a shooting star—may not end up being significant at all. One should know that trading any other kind of complex financial product involves high risks, and is not suitable for everyone. Since the shooting star is a bearish reversal pattern, bearish MACD divergence can help you to further qualify good setups. The second standard shooting star entry technique is to enter the trade when the low of the shooting star is broken (see the image above – right).

If the price ultimately continues to rise, the uptrend is still intact and traders should favor long positions over selling or shorting. In the image above, the large shooting star candlestick was larger the all the previous 7 candlesticks shown. However, the small shooting star was one of the smallest candlesticks in the series. How large or small the signal candlestick (in this case the shooting star) is in comparison to the previous candlesticks should also be considered (see the image below). Just in case you’re completely new to the shooting star candlestick signal, we’ll start with the basics. However, finding tops in the market and trading reversals can be done successfully if you have a proven methodology like our shooting star candle strategy.

• A trader realizing this might opt to wait and enter around the middle of the wick rather than enter immediately after the shooting star candle forms.
• This is a bullish analysis tool used to notice market divergence from a previously bearish trend to a bullish rally.
• Fortunately, the next candle is bearish and breaks the low of our shooting star candle on the chart.
• Due to this, the shooting star candlestick pattern is often seen to be a possible signal of bearish reversal.
• The candle that is formed after the shooting star is what confirms the shooting star candlestick.

For a candlestick to be considered a shooting star, the formation must appear during a price advance. Also, the distance between the highest price of the day and the opening price must be more than twice as large as the shooting star’s body. Just like price action signals, you need to qualify any support or resistance levels that you are relying on in order to make trading decisions. If you don’t already have a profitable trading system that works well with candlestick patterns, the next best thing to do is to combine them with other market indicators. Enty and exit levels
2080
sl 2020 to 2000 (2.80%)
taget 2230 (8%)
RR…

The Shooting Star Candlestick Pattern & the Hammer Candlestick pattern

A down day after a shooting star helps confirm the price reversal and shows that the price could continue to fall. Candlestick charts are viewed as an indispensable component of technical based price action trading. A Shooting star candlestick pattern forms when the closing price of a stock is lower than its opening price.

The price at which you are targeting to exit a trade and book profits should be equivalent to the size of this pattern and its progression. If the security reaches your expected price level, you can make a successful exit from the same and thereby book profits. An ideal or perfect formation will only occur when an immediate successive candlestick will be opening at or near the last day’s closing and falls further in heavy volume. First, buyers are enjoying their gains as the stock shoots to a climactic high. As this euphoric moment begins to set in, short traders begin to sell the stock on a flurry of buy orders. If you are a conservative trader, trade the wick’s retest (the black dashed line).

Want to know which markets just printed a Shooting Star pattern?

Listed below are some of the other characteristics for Shooting Star candlesticks as well as some of my personal observations…… They are very useful in finding reversals and continuation patterns on charts. While we discuss them in detail in other posts, in this post we… Finally, you can use it to place a stop-loss or a take-profit when trading. The region below its real body should also have a small or no shadow.

• In my experience, I have not had much luck trading them on time frames lower than the 15 Minute chart.
• You can add a buffer of a few pips if you wish to protect against possible false breakouts.
• After all, nothing is 100% guaranteed in stock trading, and you may experience false signals when trading the shooting star pattern.

Basically, as a sign that the uptrend is actually ending, after the shooting star signal, you want to see a bearish candlestick that closes below the real body of the previous candlestick. In this article, I’m going to show you how to correctly identify and trade the shooting star candlestick pattern, with both my own proprietary techniques and the standard pinbar techniques. Once you understand what shooting star trading is, you’ll understand why a one candle pattern has such a power to signal the reversal of a bullish trend. In fact, most traders do it so badly that they burn out their accounts. One of the main benefits of the shooting star pattern in technical analysis is that it is a simple formation to identify.

After a brief decline, the price could keep advancing in alignment with the longer-term uptrend. The long upper shadow represents the buyers who bought during the day but are now in a losing position because the price dropped back to the open. Price action patterns that occur on higher time frames are more meaningful. In my experience, I have not had much luck trading them on time frames lower than the 15 Minute chart. That being said, I trade them on the 15 Minute chart regularly and successfully.

The Shooting Star Candlestick Pattern

However, it is always advisable to look for other confirmatory signals before taking any trading decision. There is always a possibility that this indicator may give out false alarms or signals. Hence, for the initiation of a successful trade, it is necessary that you also check on other indicators and get confirmation about the same. Moreover, relying on this candlestick pattern without any stop loss may open the gates for unlimited losses.

You should always use a stop-loss order when trading the shooting star candle pattern. After all, nothing is 100% guaranteed in stock trading, and you may experience false signals when trading the shooting falling star candlestick star pattern. First, you need to ensure that the asset’s price is in a bullish trend. Second, as mentioned above, this pattern is characterized by having a small body and a long upper shadow.

Benefits and Drawbacks of the shooting star candlestick pattern

Other reversal patterns include the hanging man pattern, engulfing candles, and Doji candlestick formations. Refers to a bearish candlestick pattern formed up of a long upper shadow, little or no lower shadow, and a small real body near the day’s low. The shooting star candlestick strategy is a very easy and effective method to trade the financial markets. You can trade stocks, forex, currencies, commodities, futures, and even cryptocurrencies across various times. It also has a very long wick at the top and no wick at the bottom. It generally forms after an uptrend or advancement in the security’s price and there is an impending danger of an imminent fall in its price.

These patterns allow you to enter early in the establishment of the new trend and usually result in very profitable trades. As you see, the shooting star candle pattern gives us an indication that the trend might reverse. This creates a nice premise to short HP right in the beginning of an emerging bearish trend. Despite the small correction on the way down, the shooting star reaches the target of three times the size of the candlestick. After spotting such a pattern, the right thing to do is wait for a confirmation that a trend reversal is indeed happening. Finally, it is recommended that you do a multi timeframe analysis to identify key support and resistance levels for your trades.

That being said, I always draw my support and resistance levels off of the real bodies of the candlesticks – not the highs or lows. The full-blown top creates the necessary space where the bears would find no level of support to stop the drop. When combined with the reversal shooting star pattern, it makes for a killer trading strategy.

I specifically chose to update the shooting star pattern next, because the proprietary filters and entry that I use are different than most other patterns that I trade. Second, I plan to eventually update my entire free price action course. I started with my favorite price action signal, the bearish engulfing pattern.

The Stick Sandwich Candlestick Pattern + Chart Examples

Any sustainable move, with a high close, above the candle’s high, invalidates the pattern. Take-profit order is dependent on your trading style and risk management. Our advice is to consult other indicators, like Fibonacci, trend lines, or moving averages, and decide whether to exit a positive trade or not. The price action moves higher again in the session, fails to create a new high, and reverses to close at the low of the session.

A combination of price action techniques and a good trading system can help you qualify trades and can be very profitable. When trading the shooting star signal with resistance levels, I like to see the wick, at least, touch the resistance level (assuming the level is chosen and drawn correctly). Support and resistance areas tend to act more like zones than exact levels.