How To Read Morning Star Candlestick Pattern

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It often leaves the supply of the traded security too big, which leads to the lack of demand and the increase of value. This change of mood happens during the second day, although it doesn’t always mean that the trend is about to change. In trading, it’s very important and beneficial to memorize patterns of candlesticks.

  • She made her first big deal in her student years with a profitable investment in Facebook stock.
  • The good thing about them is that they reoccur often enough.
  • Now the total experience of her trade is 18 years.
  • If all of them are pointing in the same direction, it’s likely that the starting trend on the next day will copy them.
  • If there are indicators that clearly show that the trend will continue, then it’s only reasonable to do so.

The good thing about them is that they reoccur often enough. If you know how to spot one, you’ll be able to anticipate the next step before it happens. You shouldn’t try to memorize all of them, but learning the most commons ones is mandatory. If all of them are pointing in the same direction, it’s likely that the starting trend on the next day will copy them. It’s not too reliable, however, and you’ll want to use other facts to back it up.

Spotting Morning Star

Secondly, you may want to see the intraday charts of the Doji candlestick. The things you’ll need to look at are price extremes & the latest trend direction. It’s also better to keep in mind where the closing price is in relation to the opening value.

Sometimes, some company simply decide to sell off its shares, and it moves the price way up, nullifying the intraday trends that developed prior to that. Naturally, for any security, the floor would be different – some like to fluctuate over time a lot more than others. But the price will still have to turn around once it drops low enough. It’s not magic – it’s just a combination of supply, demand, volume and other factors. The only problem with waiting for the confirmation is that you’re not the only one.

Basically, when it happens, it will turn a bearish price movement into a bullish one. Like many still, it’s only a bullish pattern – meaning it will only result in a bullish trend if %KEYWORD_VAR% done right. Carolyn Huntington is an economist, professional trader, and analyst. She made her first big deal in her student years with a profitable investment in Facebook stock.

The word ‘Doji’ originates from Japanese, where it means “equal thing” and it’s very descriptive of the actual pattern. People don’t often balance out one another’s decisions in trading. Doji happens when the trend enters a stalemate, then a lot of people try to push the price one way, and then another group pushes it back. If you aren’t sure, then you can just close part of your positions and see if your conclusions about the trend continuation prove true.

Morning Star Candlestick Pattern: Spotting & Reading

You can try and estimate whether the Star is going to result in the bullish turn or not. Morning Star candlestick pattern occurs in the culmination of a downward trend and is followed by a rising upward trend. If you aim to trade frequently and look at the graphs on a regular basis, you’ll be seeing this one a lot. For amateurs, that would be just generic group of candlesticks.

morning star pattern reliability https://www.bigshotrading.info/blog/morning-star-candlestick-pattern-spotting-reading/ 'morning star candlestick'

The difference being, a lot of the Doji candles aren’t reliable and will prove continuation as much as reversal. It will not appear just anywhere and there aren’t as many price swings inside the daily period of the candle itself. The Star is not indecisive, like Dojis – the bearish traders simply can’t push any further and are forced to give into the bullish trend. Whether this battle is intentional or just a natural occurrence on the market, the price is bound to return to the opening value. The pattern doesn’t have any special powers – it’s the behavior and results of this one candlestick that condition it to become a Doji, not the other way around. There can be many of these swings, and they don’t just happen because people got together and decided to teach the other group a lesson.

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What Does Doji Mean?

If it works, a lot of people who don’t even know what a Morning Star candlestick pattern is will notice that the winds have changed and hop onto the new trend. Doji pattern can appear both after a lengthy bullish trend and a lengthy bearish trend. The direction of the candlestick itself isn’t really substantial.

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morning star pattern reliability https://www.bigshotrading.info/blog/morning-star-candlestick-pattern-spotting-reading/ 'morning star candlestick'

Now the total experience of her trade is 18 years. Over the years of trading, Carolyn has developed its own strategy that allows even those who have never traded on the stock exchange before to earn money. She also creates market forecasts and advises major shareholders, compiles investment portfolios, and teaches how to work with automated advisors. The Morning Star candlestick pattern is almost like a Doji pattern – it’s a small candle that signifies a reversal.

First, you may want to turn up the pivot points. These points tell you where the most likely support/resistance zones would be. These are determined based on the prior historical data. While the security can breach zone points closer to the middle, the further they go, the more likely it is that they’ll turn around.

Understanding Doji Candlestick Pattern

If there are indicators that clearly show that the trend will continue, then it’s only reasonable to do so. After that, the initial group could try to return the price back to normal, which could result in any number of swings. Trading usually starts where it ended the day prior – in the same direction and largely with the same ferocity. There are also other indicators and tools, and you are generally advised to use as many as you can, considering you can read them. But for starters, you can just use the combination of pivot points, your own feeling and the intraday readings on the third day. You can close your positions (either sell or buy back the shares if you’re shorting) or decrease your stake in them.

Determining The Outcome Of Doji

It’s also hard to see it coming – nor do you often need to anticipate it, seeing how Doji itself is a herald of an upcoming trend change. It’s true that you can often try and push the price where you want it by exploiting the moment of indecision, but it’s also a tad risky and doesn’t really have any real profit to it. It can lead both to a full reversal of the trend or to its continuation. It’s a phase where, basically, numerous groups try to fight for control over the trend. In this new market, the demand may be off-the-charts, and you’ll simply be unable to buy the security early enough.

Logic Behind Morning Star

These zones are basically your floor and ceiling. Under normal circumstances, the price wouldn’t go beyond the very top or bottom. So, by logic, if a Doji happened close to one of the absolutely support or resistance levels, then it’s likely to turn back after the pattern – it’s simply a natural order of things. Lucky you, the ‘Morning Star’ is one of the most common candlestick formations. Like many other it signifies a reversal of a trend.

For down-to-earth trading, however, you’ll need just a few basic instruments plus your brain. Sometime during the day, the normal trend is overtaken by the traders with the opposite goal . You can continue to trust in the trend and ignore Doji.

You can also try and estimate whether the trend will continue or not. It’s not completely reliable, so you may want to close some of your positions on the market to minimize the risks. This happens because this pattern is almost always in the bottom of the trend, meaning it’s close to the support zone. If you want to be really professional about it, you can look up several exquisite tools and indicators.

Author: Katie Conner