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6 Dec 2022 08:33:11 UTC
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Morning Star and Evening Star trading patterns. #crypto #patterntrading #candlestickpattern
Newscrypto.io presents Morning Star and Evening Star candlestick trading patterns.

Morning Star candlestick trading pattern:
A morning star is a visual pattern consisting of three candlesticks that are interpreted as bullish signs by technical analysts. A morning star forms following a downward trend and it indicates the start of an upward climb. It is a sign of a reversal in the previous price trend. Traders watch for the formation of a morning star and then seek confirmation that a reversal is indeed occurring using additional indicators.

How to trade Morning Star:
Morning star patterns can be used as a visual sign for the start of a trend reversal from bearish to bullish. Another important factor is the volume that is contributing to the pattern formation.

Generally, a trader wants to see volume increasing throughout the three sessions making up the pattern, with the third day seeing the most volume. High volume on the third day is often seen as a confirmation of the pattern (and a subsequent uptrend) regardless of other indicators. A trader will take up a bullish position in the stock/commodity/pair/etc. as the morning star forms in the third session and rides the uptrend until there are indications of another reversal.

Evening Star candlestick trading pattern:
An evening star is a stock-price chart pattern used by technical analysts to detect when a trend is about to reverse. It is a bearish candlestick pattern consisting of three candles: a large white candlestick, a small-bodied candle, and a red candle. Evening star patterns are associated with the top of a price uptrend, signifying that the uptrend is nearing its end. The opposite of the evening star is the morning star pattern, which is viewed as a bullish indicator.

The evening star pattern is considered a very strong indicator of future price declines. Its pattern forms over a period of three days:

The first day consists of a large white candle signifying a continued rise in prices.
The second day consists of a smaller candle that shows a more modest increase in price.
The third day shows a large red candle that opens at a price below the previous day and then closes near the middle of the first day.

How to trade Evening Star:
Near the end of an uptrend, the first candle should be long and bullish, the second one should be at the top and signal indecision (green or red), while the third and final candle signals a reversal is starting, as the buyers are no longer in control over the price action. Once the formation has completed, traders can look to enter at the open of the very next candle. More conservative traders could delay their entry and wait to see if price action moves lower. However, the drawback of this is that the trader could enter at a much worse level, especially in fast moving markets.

Targets can be placed at previous levels of support or previous area of consolidation. Stops can be placed above the recent swing high, as a break of this level would invalidate the reversal. Since there are no guarantees in the crypto market, traders should always adopt sound risk management while maintaining a positive risk to reward ratio.

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