A lot of traders in the market use the Japanese candlestick chart. This kind of chart lets traders forecast how an asset’s price will change in the future by offering trading signals and price information.
One, two, three, or more candlesticks can make up a pattern, such as the Morning star, in candlestick analysis. A large bearish candlestick, a smaller candlestick in the middle, and a massive bullish candlestick are the three candlesticks combined in this pattern.
This bullish reversal pattern alerts market players to the end of the bearish trend and indicates an impending upward price reversal.
It’s likely that you have seen this trend a lot when examining asset charts. However, what does it indicate?
This page contains the answers to a lot of other queries like this one.
The following topics are covered in the article:
- Key Takeaways
- Describe Your Morning Star
- Formation of Morning Star Patterns
- Ways to Spot a Morning Star
- How to Trade Morning Star Patterns: Morning vs. Evening Star
- Benefits and Drawbacks of the Morning Star Pattern
- Conclusion
| Key point | Description |
| What is the pattern of the morning stars? | A tall bearish candlestick, a short (either bullish or bearish) candlestick in the centre, and a tall bullish candlestick at the end make up the bullish reversal candlestick pattern known as the Morning Star. |
| How does the asset’s price relate to the pattern? | The price may reverse and the trend may turn upward following the chart’s development of the Morning star pattern. |
| How may the morning star pattern be traded? | It becomes sense to start trading this bullish reversal pattern from important support levels, with targets at the closest resistance levels. |
| On a price chart, how can you recognize the morning star pattern? | At the base of the protracted downward slope, the morning star forms. It is represented by three Japanese candlesticks on the chart. Between two candlesticks with different directions and larger tick volumes is a star shaped like a little body candlestick. |
| Important characteristics of the pattern | The pattern’s design is one of its main characteristics. After the first candlestick, the small central candlestick should open with a tiny gap downward. The third bullish candlestick should open with a tiny upward gap at the same moment. The second gap amplifies the pattern’s intensity and occurs infrequently. |
| conditions for morning star formation | The Morning Star is a pattern of reversal that indicates the increasing vigor of purchasers. |
| Trading techniques for the Morning Star pattern | Many trading techniques, such as scalping, day trading, swing trading, and long-term trading, are covered in this list. |
| The Morning Star candlestick pattern’s advantages and disadvantages | The Morning Star offers a lot of benefits. It is seen throughout a wide range of time periods and practically all financial markets. Finding the Morning Star on a price chart is a reasonably easy undertaking. When trading the Morning Star pattern, there are particular guidelines to adhere to when placing a stop-loss order. When a bullish trend is just getting started, traders can also open long positions using the Morning Star at the best possible price. But there are also disadvantages to this structure. For instance, beginning with H1, a stronger signal can be acquired on higher time frames. Due to market noise, traders may receive erroneous signals on shorter time periods. The Morning Star’s requirement for extra confirmation through the use of other candlestick patterns and technical indicators is another drawback. |
| Which time frames work best for Morning Star Pattern trading? | You may trade this pattern on any time frame. The quantity of confirmations determines how accurate it is. The buy signal is stronger the longer the time frame. The quantity of confirmations should be higher on shorter time frames, which could lead traders to overlook a more advantageous entry point into the market. Traders should get as many confirmations of this pattern as they can because this Morning Star characteristic is linked to a considerable amount of trading noise. For H1 and higher time frames, the Morning star design is advised. |
| When should I place a stop-loss order? | Beyond the crucial support level, a stop-loss order is placed below the bodies and shadows of the candlesticks that create the pattern. |
Describe Your Morning Star
A candlestick with a small body that forms at the bottom of a downtrend and indicates a reversal of the upward trend is known as the morning star. Three candlesticks make up the design: a little candlestick in between two larger ones that face different directions.
The Morning Star can also exist in the absence of a body. The Morning Star Doji is the name given to this pattern. It offers a more potent indication of a trend reversal.
The ability of the candlestick’s body to be either bullish or bearish is the Morning Star’s primary characteristic. There should be spaces between the tall and short candlesticks in the classic example when the pattern forms.
Formation of Morning Star Patterns
Let’s examine each step in more detail:
- The first tall red candlestick shows how common long-term sellers are in the market.
- Subsequently, a little body on a short candlestick appears, alerting market players. This candlestick’s structure indicates waning negative pressure as the session’s buyers and sellers begin to equalize.
- Subsequently, a sizable green candlestick starts to emerge, ultimately verifying the upward trend in the price. In other words, quotes hit a tipping point when a short-bodied candle forms. It is improbable that sellers will drive the asset’s price lower than this.
The Morning star pattern can be seen in the chart above, following which bulls tried to buck the trend. The price did, however, move back to the support level. Next, on the #DIS shares daily chart, Hammer and Inverted Hammer patterns were visible. The last bullish indication for the upward price reversal and the start of the uptrend was received by market participants.
Ways to Spot a Morning Star
Every candlestick pattern has unique characteristics. Make sure the Morning star pattern is correctly constructed before identifying it and initiating a transaction.
- When the trading instrument reaches the bottom of the downtrend, either at the end of the trend or after a prolonged consolidation, the Morning Star pattern is produced.
- Bearish should be the first Japanese candlestick to appear.
- Generally speaking, the Morning star should show a tiny gap between the first and second candlestick.
- The second candlestick should resemble a doji, which has no body at all, or have a short body of any color. The star is this candlestick. It indicates that bear power is diminishing.
- There can be a gap after the formation of the middle candlestick. The level of formation of the Morning star is strengthened by the second gap.
- The first bearish candlestick should be at least 50% overlapped by the third bullish candlestick. The green candlestick may occasionally cross over the first one quite a bit, indicating a strengthening of the pattern and an increase in the buying power.
- The significance of the final candlestick is equivalent to that of the star. It demonstrates the market’s propensity for opening long bets and bullishness.
- The market keeps rising during the ensuing trading sessions once the Morning Star pattern is established. The price increases, which leads to the uptrend’s further development.
Examples of Morning Star
There are various time frames and financial marketplaces on which the Morning Star pattern can appear. Here are some illustrations of the pattern for various trading instruments.
1. M30 time frame for the USCRUDE commodity market.
Example of intraday trading.
The graph displays a brief downward trend. The price created the Morning star pattern after it crossed the top border.
Once the design was finished, the price turned around and began to rise. Following this Bullish engulfing pattern, oil saw a sharp increase.
Bears began selling the asset when the price approached the resistance level of 79.82, and a bearish marubozu pattern emerged. This evolved into a signal for ending long trades.
2. H4 time frame, GBPUSD, forex market.
An example of medium-term swing trading.
The GBPUSD quotations kept falling inside the Symmetrical triangle chart pattern following a protracted downtrend.
A sequence of Morning star doji and Morning star reversal candlestick patterns appeared on the chart before breaching the pattern’s upper border.
The most recent pattern also featured an inverted hammer pattern. Following that, the price started to rise quickly and broke through the 1.2214 resistance level.
How to Trade Morning Star Patterns
Numerous trading tactics can be utilised with the Morning Star pattern. Let’s examine the most successful one.
1. Using support levels as a trading technique
Trading the Morning Star pattern and entering trades at support levels are key components of this technique.
Let’s examine this tactic in more detail using Alphabet, Inc.’s hourly chart.
Following the formation of the gap on the chart, the price dropped further, hitting the Morning star doji reversal pattern around 121.58, the level of support. Furthermore, historical evidence indicates that the disparity will eventually narrow.
As a result, trading at the crucial support level may continue for a considerable amount of time after the Morning Star Doji formed.
The entire gap, or 129.26, 135.15, and 140.67, is the aim. It is required to close the position entirely at 140.67 and to take partial profits at 129.26 and 135.15.
It is recommended to place a stop-loss order below both the Morning Star doji pattern and the support level.
The price formed the bearish Shooting Star and Evening Star reversal patterns on the chart and started to decline after closing the gap at the resistance level of 140.67.
2. Using alternative candlestick patterns and morning star confirmation as a trading method
The EURUSD pair has fallen inside the negative trend to the buy zone between 1.0667 and 1.0635 on the four-hour chart.
The initial indication of the upward reversal was provided by the bullish engulfing candlestick pattern. The Hammer patterns were one of two Morning star patterns that developed. The reversal near 1.0734 was also confirmed by three white soldiers and another Hammer pattern.
In light of this, after the Hammer pattern appears and affirms bullish momentum, long trades can be initiated close to 1.0734.
1.0779, 1.0864, 1.0954, and 1.1007 are the targets. To increase earnings, partially close your trade.
Below 1.0667 and the second Morning star formation, a stop-loss order is put.
The pair gave a signal to end the long trade around 1.1007 as it began a downward reversal following the Shooting star bearish pattern.
3. Combining huge chart patterns and technical indicators to trade the Morning Star pattern
Because it makes use of huge chart patterns, technical indicators, and the Morning Star candlestick pattern, the combined strategy seems to be more successful.
The instrument determines this strategy. Make use of several kinds of technical indicators, like:
- MACD and MA Cross are trend indicators.
- RSI and stochastic oscillators.
- Tick volume, AD (Accumulation/Distribution), Chaikin oscillator, MFI, VWAP with SMA, and OBV are examples of volume indicators.
You can use the RSI, MFI, MACD, VWAP, and SMA20 indicators to examine USCRUDE’s daily chart.
With the help of these indications, you may identify levels of support and resistance, overbought and oversold areas, the strength of the present trend, and anticipated price reversal levels.
To find more advantageous entry and exit opportunities, graphical and candlestick analysis are also required.
The following is technical analysis:
- Establish the support and buy zones.
- The symmetric triangle patterns are visible on the daily chart. The price may go above its upper or lower bound. Still, there’s a good chance that the cost will go up.
- Additionally, the Hammer reversal pattern has emerged.
- The Hammer is being followed by the Bullish engulfing pattern.
- Remarkably, a number of designs reversing Morning stars have finished.
- From the oversold boundary, the MFI recovers upward.
- The RSI exhibits a reversal upward from the lower bound.
- When the price was inside the symmetrical triangle, MACD crossed the zero level from below to give an earlier upward reversal signal.
- The MACD was quickly climbing in the positive zone when the triangle was broken, thereby validating the bullish trend.
- Following the break-up of the upper limit of the Symmetrical triangle, tick volumes started to increase rapidly, signaling the mass initiation of long trades.
- The price provided more evidence of a bullish trend when it passed both the VWAP and SMA20 lines from below.
- Purchase following the Symmetrical Triangle Pattern’s breakout.
- Stop-loss.
- Goal 1.
- Objective 2.
- Target 3: Finish the trade off.
- The bearish Marubozu pattern indicates a reversal in price downward.
Generally speaking, once the Morning star pattern developed and the triangle’s upward limit was broken, the combined technical analysis produced more than ten buy signals. In the long run, this transaction could yield a sizable profit in two to three months.Throughout this time, the asset has increased in value by almost 80%.
Patterns of Morning and Evening Stars
At its peak, the Evening star pattern, which is the bearish counterpart of the Morning star pattern, indicates an impending trend reversal.
| Morning star | Evening star |
| At the bottom of the downtrend, the Morning Star pattern forms. | At the apex of the uptrend, the Evening Star pattern is produced. |
| indicates an upward reversal of the downtrend. | indicates a downward reversal of the upswing. |
| The first candlestick in the Morning Star pattern should be bearish, and the third should be bullish. It is possible for the second candlestick to be bearish or bullish. | The Evening Star pattern should have a bullish first candlestick and a bearish third candlestick. Either a bearish or a bullish second candlestick can be seen. |
| Below both the Morning star pattern and the support level, a stop-loss order is placed. | Above the resistance level and the evening star pattern, a stop-loss order is placed. |
Benefits and Drawbacks of the Morning Star Pattern
Every candlestick pattern has benefits and drawbacks.
When using the Morning Star pattern in trading, one must adhere to risk and money management guidelines even though it provides a strong reversal indication.
Benefits
- At the bottom, the Morning Star pattern suggests a possible trend reversal that would enable you to initiate long positions at more advantageous pricing.
- Almost all financial markets, including the stock, commodity, Forex, and cryptocurrency markets, exhibit the pattern.
- Trading on a range of timescales, from M5 to MN, is possible with it. The strength of the morning star signals increases with increasing time interval.
- There are distinct entry points, goals, and stop-loss levels produced by the morning star pattern.
- On the price chart, the candlestick pattern is simple to recognize.
Drawbacks
- The pattern could provide erroneous indications on shorter time frames because of the higher level of market noise.
- Technical indicators and other candlestick or chart patterns must validate the pattern.
Conclusion
A traditional Japanese candlestick pattern known as the “morning star” indicates that the market is about to enter a low-price zone and then the trend is about to reverse.
On a price chart, the pattern is simple to identify and has useful trading requirements. When you use the pattern correctly, your trades will become more profitable.
The Morning Star candlestick pattern works best when combined with other technical indicators and chart patterns. You’ll be able to perform more precise technical analysis and initiate more lucrative trades with this method.
One of the greatest brokers on the market, LiteFinance, offers a risk-free sample account where you may try trading the Morning Star pattern. A large selection of trading instruments is accessible through the multipurpose web platform.
FAQ’s
Is there a bullish Morning Star pattern?
- Indeed, the Morning Star pattern is optimistic and indicates a reversal of the downtrend. This pattern suggests that bulls are gaining traction in the market and that bears’ strength is declining.
What does the chart’s Morning and Evening star pattern look like?
- At the bottom of the downtrend, the Morning Star pattern, which comprises three candlesticks, forms. These three candlestick patterns are tall bullish, short bullish or bearish, and tall bearish. At the apex of the upswing, the evening star pattern forms. Three candlesticks are also included in it: a tall, bullish candlestick, a little, coloured candlestick, and a long-bodied, closing bearish candlestick.
In what way is a Morning Star pattern accurate?
- The time frame affects the Morning Star Pattern’s accuracy. The accuracy of the reversal signal increases with the time frame chosen. The signals from the Morning star should, however, be verified by additional patterns and technical indicators, just as other trading patterns.
How often does the star of the morning appear?
- Given that the price is cyclical on all time frames, the Morning star pattern on the chart typically indicates an upward reversal.
On a daily chart, how many days does a morning star pattern take to develop?
- One candlestick forms on the daily chart on a single day. Three candlesticks that appear over the course of three days make up the traditional Morning star motif. It can occasionally take more than three days for the pattern to emerge.