How To Trade The Shooting Star Candle

Before we share tips on how to make money by trading a shooting star candlestick pattern, let’s first discuss the importance, as well as the key strengths and weaknesses of this formation. Given that there are more than 100 different trading platform candlestick patterns, it is no surprise that some of them look very similar. In this particular case, it is worth noting the difference between a shooting star and a hammer, an inverted hammer, and a gravestone Doji.

In this situation, you could use momentum oscillators like the Stochastics or RSI to determine the overbought level. A hammer takes place at the end of a downtrend, while a shooting star occurs at the end of an uptrend. We risked 75 pips to gain 150 pips, which represents quite a good risk to reward ratio. However, the pattern is not flawless and requires the use of other technical indicators to confirm the signals. In some situations, the price continues to rise after the appearance of the Shooting Star.

The gravestone Doji pattern looks almost entirely the same as the shooting star candle. Traders consider it to be a bearish reversal pattern that takes place at the end of the uptrend, again the same as the shooting star. This is especially the case with single-candle patterns since it is tough to predict future trends based on the shape of a single candle. Also, it is useful to check other candles near the shooting star candle to assess additional confirmation of a reversal. The Shooting Star Candlestick Pattern can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy.

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A conservative trader might wait for a while and enter the trade in the middle. This means a trader is looking for a shorter trade, possibly with the tighter stop-loss. In this article, we will show you the main elements of this pattern, how to spot it.

Moreover, we will explain how you can trade it profitably and increase your odds of success. If you would like to practice trading with the Shooting Star Candlestick Pattern, you can open an account with a forex broker and download a trading platform. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration. The stop-loss order should be above the high, with some room left to allow for whips and low-liquidity moves.

When the price advances and shows a sudden drop, it leaves behind a long upper wick. As always, verify these signals by checking other candles and indicators, and look for confirmations before you enter a trade based on a single pattern. As said earlier, you should be cautious and not try to trade all shooting stars you can see on a chart.

Like a hammer, an inverted hammer is a bullish reversal pattern that signals the growing presence of the bulls in the equation. All information on The Forex Geek website is for educational purposes only and is not intended to provide financial advice. Any statements about profits or income, Maxitrade Broker Review – is it a scam or not? expressed or implied, do not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all entries.

How To Trade The Shooting Star Candlestick Pattern

The Shooting Star Candlestick Pattern is just one method of market analysis amongst thousands. Based on the shape of a candle, a shooting star is a bearish pattern since the long wick is a sign of weakness on the side of the bulls. Shooting Star Candlestick Pattern overbought conditionIn the chart above, you can notice that the Shooting Star is telling an overbought condition. The bulls were dominant, but right after Shooting Star’s appearance, the Stochastic is showing a drop in price levels, defining an oversold situation.

Many consider the Shooting Star a simple tool for helping to identify price reversals. But as we already mentioned, it may not be wise to rely solely on the Shooting Star for a forex trading strategy. The bullish version of the Shooting Star is the Inverted Hammer Candlestick Pattern and it looks similar.

shooting star forex

At one point, the price action creates a new short-term high, but the bulls fail to force a close in the upper part of the candle. On the contrary, the price rotates lower and closes near the session’s open and low price levels, thus creating a shooting star. As the shooting star pattern consists of a single candle, trading this formation is quite straightforward. As outlined earlier, a shooting star pattern occurs at the top of an uptrend as the bulls start to lose momentum. That is why a shooting star is a crucial element of the price action, as it signals that a new trend may be starting soon.

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You should trade forex in a way that suits your own individual style, needs and goals. The methods of implementing the Shooting Star Candlestick Pattern into a trading strategy that are outlined within this article are just ideas. I would always ensure that I have good money management, trading discipline and a trading plan when using any forex strategy. As with any other candlestick pattern, it is an option to use the Shooting Star on multiple timeframe analysis. We could look for the Shooting Star on longer timeframes and determine entry points on shorter timeframes.

  • If you would like to practice trading with the Shooting Star Candlestick Pattern, you can open an account with a forex broker and download a trading platform.
  • A conservative trader might wait for a while and enter the trade in the middle.
  • Moreover, we will explain how you can trade it profitably and increase your odds of success.
  • The Shooting Star Candlestick Pattern is just one method of market analysis amongst thousands.

Also, the upper wick represents the buyers who were in a strong position during the day, but now they may be losing control because of the price drop. The purple line is the entry point of the trade, which is near to the close price of a shooting star candle. The left candle in the photo is green since the close is higher than open, while the right candle represents the opposite scenario. Although both candles represent a shooting star, the red candle is stronger since the bears take over and force a close near the session’s low.

What Is The Shooting Star Candlestick Pattern & How To Trade With It

However, the Inverted Hammer emerges in a downtrend and signals the potential price rise, whereas the opposite is true for the Shooting Star. Any information or advice contained on this website is general in nature only and does not constitute personal or investment advice. You should seek independent financial advice prior to acquiring a financial product. All securities and financial products or instruments transactions involve risks. Please remember that past performance results are not necessarily indicative of future results. An inverted hammer occurs at the bottom of the downtrend when the bears show the first signs of weakness and tiredness.

shooting star forex

Most seasoned traders consider the shooting star to be a powerful price formation due to its effectiveness and reliability. A shooting star is a single candle bearish reversal pattern that occurs at the top of an uptrend. The price action moves higher until it prints a new high, which is then not followed by a strong close. The bears use this opportunity to get a closing price near the open and session’s low. As seen in the photo above, a gravestone Doji candle has no body structure, but the close and open levels are the same, which is the key characteristic of all Doji candlestick patterns. A combination of these two patterns increases the chance of a bearish reversal.

On the other hand, as it is the case with all candlestick patterns, a shooting star issues a signal, not a trading signal. For this reason, always verify the validity of a signal by checking other technical indicators. The candlestick comprises of one candle which has a long upper wick and little or no lower forex wick. As seen in the photo above, an inverted hammer takes place in a downtrend while a shooting star occurs after a series of bullish candles that bring the price action higher. In an example above, we see how the EUR/USD is in a clear uptrend as the price action moves higher in a consolidated fashion.

shooting star forex

The reason we decided to trade this opportunity is that we had two additional signs that signaled an impending reversal. In this particular example, we placed a profit-taking order at the previous resistance. Given that the market had pushed through this resistance line, it is likely to come back to test it in the context of support once it corrects lower.

I would prefer to use the majority of candlestick patterns such as the Shooting Star Candlestick Pattern on the 1-hour charts and above. I tend to find that these charts contain less market noise than the lower time frames and thus give more reliable signals for my forex trading strategies. In a short time frame, the price action creates two candles with long wicks that extend higher, which signals that the bulls are losing their momentum. Finally, a clean shooting star candlestick is formed and then followed by a long bearish candle that confirms the reversal. These candlestick patterns are a must-learn when getting started in trading.

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