Morning Star Candlestick Pattern?

Last Updated: 4 Jul 2022

If you’re looking to add a new tool to your trading arsenal, the morning star chart candlestick pattern can be an incredibly powerful indicator. When used correctly in conjunction with technical indicators and other forms of analysis, this is one of the most reliable reversal patterns in the world. It is used by all kinds of traders, including beginners and professionals alike. This guide will show you how to trade using the morning star candlestick pattern so that you can use it in addition to your overall trading strategy in any market environment.

What is the Morning Star Candlestick Pattern?

The Morning Star candlestick pattern is one of the most popular candlestick patterns in technical analysis. It is named after the star that appears on the candlestick chart after prices close above the open price during an uptrend. The appearance of this pattern shows that bullish traders are beginning to take control of the market after prices decline, which means you can expect buying pressure to continue and propel prices higher in the future.

Also known as the Three Inside Down, it is a reversal candlestick pattern that predicts bullish reversal after a bearish trend. The name Morning Star comes from the fact that this pattern looks like a star in the morning sky – three candles lined up next to each other with the middle one inverted and pointing downward. It can help traders determine when to exit their long positions and re-establish short positions in anticipation of a bearish reversal.

The morning star candlestick indicator shows that prices are likely to increase after the pattern forms. The pattern includes three candles, which are relatively long-bodied in comparison to the previous trend of trading activity. The first candle has a short body that gaps down below the price of the previous candle, which has a larger body that closes at or near its high.

The second candle has a large body that opens higher than the midpoint of the first candle’s body and then closes lower than its opening price, forming an upper shadow on the body. Finally, another small black candle appears, confirming that bullish sentiment has been eroded since the first black candle appeared and signalling an increase in selling pressure even further.

The Morning Star candlestick pattern is an important sign of indecision in the marketplace and, as such, can provide clues to whether or not you should take advantage of current market conditions or be patient.

How to identify Morning Star Candlestick Pattern?

A morning star candlestick pattern has three candlesticks: a tall green candle followed by a shorter red candle that’s either above or below/between both shadows (shadows denote previous price action) and a white candle that opens lower than its body and closes at or near its opening price point. In most cases, a bullish Morning Star candlestick will lead to a sustained uptrend that could last for several days or even weeks, while a bearish Morning Star candlestick signals further possible declines ahead. The pattern alone doesn’t predict direction but rather shows when the path has been decided by weighing public sentiment between buyers and sellers.

How to Trade using Morning Star Candlestick Pattern?

The most interesting thing about the morning star candlestick is that it can be traded with great success in all market conditions, ranging from sideways to trending markets. Once you see a morning star candlestick indicator, it is wise to wait for confirmation of a trend reversal. This allows you to increase your odds and avoid whipsaws.

You should also wait for confirmation that prices have traded above or below resistance and support before placing your trade. Trend lines can be used as a guide but wait until after the price has closed either above or below them before entering a trade

A Morning Star candlestick can indicate a reversal in a stock or future’s price trend. The candlesticks in a morning star pattern will look like an upside-down and inverted version of each other with one having a small body and long wicks, while another has short wicks but a relatively long body.

Final words

The morning star candlestick pattern is a standard candlestick charting convention. While it’s not guaranteed to be a bearish signal, it’s been used for centuries to indicate that bears are in control and a bounce could be coming from a downtrend. This pattern works well with confirmation from other market data. It is best to watch for possible reversals and take quick profits when you see them materialize before moving onto different setups and plays.

Frequently Asked Questions

What are the Advantages and Limitations of Morning Star Candlestick?

The biggest advantages of the morning star candlestick pattern are as follows:

• It is a reversal pattern with a low false breakout rate, and it forms relatively infrequently while being a very powerful signal, which means that it indicates a trend reversal.
• It includes three candlesticks which ensure that we have a complete and valid setup.

Its main limitation is that it only works in an uptrend.

Is Morning Star Candlestick a good strategy?

The Morning Star candlestick pattern is a bullish reversal indicator that has historically been an accurate predictor of market reversals. Traders use the morning star candlestick pattern to signal that the market may be reversing, particularly after a long downtrend, since the morning star candlestick is an indicator of strength.

Is Morning Star Candlestick bullish or bearish?

In terms of direction, a morning star candlestick is considered bearish. In other words, it’s a reversal pattern that signifies that an uptrend has reversed into a downtrend. The morning star candlestick consists of three candlesticks: a tall black candle followed by a Doji, which is a small candlestick with very little price movement from its open to its close. Some traders will not enter short positions unless they observe a bearish reversal candlestick after three or more preceding bullish candlesticks. It can also be helpful to put all indicators on a chart together (moving averages, RSI, stochastics, etc.) with price action to ensure they all point in an upward direction.