How to Spot & Trade with the Shooting Star Candlestick Pattern Day Trading is Better at DTTW

However, the bulls weakened with each attempt, and the bears became stronger. This is evidenced by the formation of several bearish patterns, including reversal patterns, for example, hanging man, shooting star, and marubozu. It is easy to confuse the two candlestick patterns since they are similar in appearance. Both of them have a small or no lower shadow, tiny real bodies that are close to the candle’s lower portion, as well as long upper shadows. The next candle is a long bearish candle that confirms that a reversal is taking place. Whenever you decide to trade the reversal that was initiated by a shooting star, the stop loss should always be placed above the candle’s high.

If you are a conservative trader, trade the wick’s retest (the black dashed line). If you are rather aggressive, enter the trade at the opening of the next candlestick. As a trader, it is fairly easy to determine your next move by using this pattern. With reference to the chart above, the expected effect is lower prices. If you are interested in trading using technical analysis, have a look at our reviews of our recommended brokers to learn which tools they offer. Another similar candlestick pattern in look and interpretation to the Shooting Star pattern is the Gravestone Doji.

How to trade the shooting star candlestick

If we analyze our shooting star formation here, we can see that all of these important guidelines have been met. As such, we can confidently label this candlestick as a shooting star pattern. We want to build a simple yet effective strategy for trading the shooting star that will be easy to implement in the market.

• We want the shooting star pattern to have either touched or penetrated the upper line of the bearish channel.
• Like the Inverted hammer it is made up of a candle with a small lower body, little or no lower wick, and a long upper wick that is at least two times the size of the lower body.
• The hammer is a candlestick formation that forms a bullish reversal pattern that mostly takes place at the lower end of downtrends.
• When a shooting star candlestick forms at the resistance zone, then open a sell order instantly.
• But the name of the shooting star candlestick will change to inverted hammer candlestick.

Noice the red candle that follows immediately after the annotated shooting start? A corrective phase is essentially a price move that occurs against the primary trend. So, if the primary trend is up, then the corrective phase would occur as prices are moving lower.

Analyzing Candlestick Price Patterns

In addition, the MACD indicator also began to move into the negative zone. Then the hanging man, the evening star, and another shooting star are formed. The transition of the MACD into the negative zone and the impulsive breakout of the support level served as additional confirmation. For this reason, it is important to always cross-check the signal that a shooting star generates with other indicators, or other candlestick patterns. For instance, in the vicinity of a shooting star there may be other formations that signal the reversal or indecision.

It should be emphasized that when the resistance was broken out, the price successfully tested this level and headed up. With a more risky trading strategy, it is possible to open trade even higher, in the zone of formation of a shooting star and a hanging man. The pattern indicates that buyers tried to reach the top from the session’s opening but failed, and the price returned to the opening range by the end of the session. That is, the candle’s closing price is close to the opening price, which is also indicated by the long tail of the star. The two are usually reversal patterns that form at the top of a major rally. Price action trading strategies focus on the movements of the market based on previous price fluctuations.

Strategy 1: trading with confirmation

A shooting star tells you that a financial asset jumped sharply when the market or the candle opened. It then stabilized close to the upper side of the candle and then moved to the next candle. Price action trading takes into account various technical analysis tools including high and low swings, price bands, trend lines, and charts. However, caution would have to be used because the close of the Shooting Star rested right at the uptrend support line for Cisco Systems. Generally speaking though, a trader would wait for a confirmation candle before entering. The Shooting Star is a candlestick pattern to help traders visually see where resistance and supply is located.

You can see when the exit signal was triggered on this trade by referring to the magnified area at the lower right of the price chart. Afterward, price tanks, and while it tries to rise in the next few days, it shooting star forex pattern struggles to rise above the shooting star highs affirming the bearish momentum. The setup allowed traders to enter short positions as soon as the bearish candlestick occurred after the shooting star pattern.

What is a Shooting Star Candlestick Pattern?

The bullish version of the Shooting Star formation is the Inverted Hammer formation that occurs at bottoms. The Shooting Star formation is considered less bearish, but nevertheless bearish when the open and low are roughly the same. Harness past market data to forecast price direction and anticipate market moves. Trade up today – join thousands of traders who choose a mobile-first broker.

This website is using a security service to protect itself from online attacks. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. It is reversal pattern that has long Lower Shadow and tiny or no Upper Shadow. Another example shows an increasing Shooting Star that has been formed after an increasing movement, then the trend followed a decreasing direction.

Shooting star (candlestick pattern)

Finally, you can use it to place a stop-loss or a take-profit when trading. When the market found the area of resistance, the highs of the day, bears began to push prices lower, ending the day near the opening price. Also, there is a long upper shadow, generally defined as at least twice the length of the real body.