Morning Star Pattern: how to trade?🌟

13 de mai. de 2022

❗️The Morning Star pattern is a market reversal pattern consisting of three candlesticks that indicate bullish superiority. This pattern warns us about the weakness of the ongoing downtrend, which, in turn, suggests the beginning of an uptrend.

⚠️Traders observe the formation of the "Morning Star" pattern on the price chart, and then confirm with the help of other technical tools on the Forex currency market.

✅Morning Star pattern: Three forming candles

⏺Big Bearish Candle
⏺A small bullish or bearish candle
⏺Big Bullish Candle

The most important thing to remember is always that the market must be in a downtrend in order to trade according to the "Morning Star" pattern.

In order to confirm the downtrend, mark the lowest lows and the lowest highs.

1️⃣The big bearish candle is the first part of the Morning Star reversal pattern. This candle indicates that the bears are in full control of the market, which means that sellers continue to pressure the market.

At the moment, you should only look for sale deals, since there are no signs of a reversal yet. Here the Morning Star pattern is just beginning its formation.

2️⃣A small bullish/bearish candle is the second candle that starts with a bearish gap down. This candle indicates that sellers are unable to lower the price, despite very great efforts.

The price action ends with the formation of a rather small bullish/bearish candle (Doji candle).

If this candle is bullish, then we have an early sign of a trend reversal.

3️⃣A large bullish candle is the third candle that has the greatest significance, because here the real pressure of buyers is manifested. If the candle starts with a break, and buyers can push prices up by closing the candle even above the first red candle, this is a clear sign of a trend reversal.

✅Morning star: how to trade this pattern on Forex?

As we already know, the Morning Star pattern is a reversal pattern. As a rule, it indicates that bulls are capturing the trend, and bears are losing control.

Most beginners trade using the "Morning Star" pattern on their own, without using technical tools, or at least tips from more professional traders.

We do not recommend doing this — it is not as reliable as it may seem. Always connect this pattern with other reliable indicators, support and resistance levels, as well as trend lines.

So, in this strategy, we combined the Morning Star pattern with volume. Volume plays an important role in the formation of the model.

If the first red candle shows a low volume, then this is a good sign for us. Then, if the second candle is green and the volume is growing, this indicates buyer pressure.

After all, the volume of the third long green candle should be high. The large volume of the last candle indicates the confirmation of the upcoming trend and the entrances to purchase transactions.

If the third bullish candle has a low volume, do not pay attention to the fact that the Morning Star is forming. This volume does not indicate a bullish reversal.

To sum up: do you observe the closing of the third candle with a large volume? Open buy positions and move along with the uptrend until there are signs of a reversal.

✅Morning Star pattern: entry, take profit and stop loss

We have to open a deal when the next green candle closes. There are many ways to lock in profits.

We can close a position in any resistance zone or supply-demand zone. In this deal, we hold our positions because we have opened a deal since the beginning of a new trend.

You can also close your positions when the price approaches a significant resistance level on the higher timeframe.

⚠️Combining this pattern with volumes makes trading more reliable. Therefore, you need to place a stop loss just below the second candle.

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