ᑕᑐ Morning Star Candlestick: Patterns, Formation, Meaning, Examples

After a few days of decline, a large bearish candle forms, reinforcing the downtrend. This second candle is a visual representation of indecision, suggesting that sellers are beginning to lose momentum. Finally, on the third day, a long bullish candle emerges, closing above the midpoint of the first candle, signaling a shift in sentiment. This three-candle sequence completes the Morning Star pattern and hints that an upward reversal may be imminent. Imagine spotting a market turning point before it takes off, giving you a prime opportunity to ride the trend early. This is precisely what the Morning Star candlestick pattern offers—a powerful signal of bullish reversal that can transform your trading strategy.

This article is all about morning star candlestick patterns; its definition, how it works, the best practices in spotting it, and how it compares with other candlestick patterns. A Low Stochastic occurs when the currency pair prices close near its low price and keep decreasing. An oversold condition is signalled when the stochastic lines are below 20, providing traders with an upward market reversal. This prepares traders to enter long trade positions, with the prices expected to increase soon. By studying these characteristics, traders can confidently incorporate the morning star candle pattern into their trading strategies. The morning star is a useful tool for traders seeking to identify potential market reversals, but it does come with some benefits and limitations.

Difference Between Morning Star and Evening Star Candlestick Patterns

A Doji candlestick pattern looks like a cross, inverted cross, or plus sign. It is characterized by having little to no real body and occurs when the open and close prices are virtually the same. This pattern also shows up during periods of morning star forex market indecision, when momentum slows and the market prepares for a potential reversal.

This is the second candle in this three-candle pattern called the Doji morning star candle.
In the images above, the candlesticks of the morning star patterns did not have very long lower shadows (or wicks).
Some require lower highs and lower lows, while others require only a short streak of consecutive lower candlesticks.
This pattern signals that the downtrend is likely exhausted, and a potential reversal is underway due to increasing buyer confidence.
Here’s a straightforward guide to identifying the Morning Star pattern effectively, emphasizing each candle’s unique role and adding confirmation tools for enhanced reliability.
By combining these strategies with the Morning Star Pattern, you can enhance the reliability of your trades and make more informed decisions.

In technical analysis, the Doji candlestick has a small candle that indicates market indecision or price consolidation. This candle formation further confirms the bullish reversal because of the prevailing strength of buying pressure. Remember, if you’ve noticed market pattern that looks similar to the morning star but in an uptrend market, there’s a chance that it’s an evening star pattern. So, it’s only logical that morning stars are established during a depreciating market—specifically, at the bottom of a downtrend. Here are the five must-forms to confirm whether you’re (actually) looking at a morning star candlestick.

Trading Tools

Relative Strength Index helps traders measure price fluctuation in overbought and oversold market situations. Combining it with the Morning Star Indicator, traders are given ideal entry points when the market is at its lowest, to profit from the uptrend. To trade with the Morning Star RSI strategy, we use 5-periods RSI and enter buy positions as soon as the RSI crosses level 30, as a Morning Star forms. This is because reading over 30 indicates the market correcting itself from an oversold situation to a normalized uptrend that encourages traders to open long positions.

It is a three-candle price action, often indicating a bullish reversal in the market.
When the Morning Star Pattern forms near a moving average, it can provide a reliable signal of a potential reversal.
The morning star candlestick pattern is useful in predicting a currency pair’s potential bullish reversal trend.
So in summary, with proper confirmation and optimal context, the morning star can provide helpful reversal signals for Forex traders.
While the Morning Star pattern is reliable, it can still produce false signals, especially in choppy or trendless markets.
The alternative leads to an inside bar, and a third candle with no relevance to the pattern.

The morning star Forex strategy is common among traders looking for reversals on pairs like EUR/USD, GBP/JPY, or USD/CHF across various timeframes. For stocks, the morning star typically occurs at support zones or after a sharp decline, offering a strong buy signal when confirmed by volume or trend indicators. To further increase the effectiveness of the Morning Star pattern, adapt your strategy to the current market environment. In highly volatile or trending markets, pairing the Morning Star with other indicators (such as MACD) can improve your chances of a successful trade by confirming the trend’s strength. The second candle is a small-bodied candle, typically a Doji or a spinning top, that reflects indecision in the market.

Morning Star Candlestick – Forex Trader’s Guide

The smaller body signifies that the aggressive selling has paused, and there’s a potential shift in control. A Doji Morning Star is often considered stronger because the doji signals deeper market indecision before buyers take control. The Morning Star pattern is a valuable tool for identifying potential bullish reversals. By combining it with other indicators, you can make more informed decisions.

Morning Star vs. Evening Star

If you would have entered the trade after price pulled back near the 50% mark of the outside (third) candle, you could have made more than 3x your risk. The third candle, in a non-Forex morning star, should open at or below the first candle in the pattern. However, it should not engulf the second candle, but leave it isolated (see the image on the right). By large, this bullish candle should be similar to the size of the first candle. The Morning Star pattern starts with a comparatively bigger sized bearish candle, followed by a smaller red-coloured candle that is only slightly bearish.

However, the second candlestick in this three-candle formation must be a low range candle, like a spinning top or doji (not required in a regular engulfing pattern). In the last couple of articles of this price action course, we began learning about multi-candlestick patterns. In this article, we will learn about trading the morning star candlestick pattern – our first three-candle pattern. However, multi-indicator analysis is always advised when trading the morning star candlestick pattern.

Learn about the ideal market conditions that enhance the reliability of the Morning Star pattern. Understand each component of the Morning Star pattern and its role in trading. Keep reading to uncover the secrets of mastering this pattern and take your trading skills to the next level! MACD (Moving Average Convergence Divergence) is like your market trend detective.

The suitable entry point with this indicator is the closing point of the green candle that appears immediately after the three red candles. The stop-loss order can be placed at the currency pair price reaching close to the resistance level in a higher timeframe. The take profit price can be set at a level where the currency pair prices touch the old support level in the pattern. This pattern is great for spotting potential reversals, but it’s important to confirm it with other tools to ensure it’s not a false signal. The Fibonacci retracement tool is popular for identifying potential reversal points by calculating levels based on the Fibonacci sequence.

In the image above, you will see a strong bearish price movement, followed by a morning star candlestick pattern. As I mentioned earlier, in Forex, the morning star usually looks like a variation of the bullish engulfing pattern. In the pattern above, the last candle of the pattern engulfs the previous three candles (nearly four).

Morning Star Candlestick Pattern Example

It appears at the end of an uptrend, signalling a potential shift to a downtrend. The morning and evening stars are similar, except the latter mirrors the former, consisting of a long bullish candle, a small-bodied candle, and a long bearish candle. The meaning of a morning star in trading refers to a bullish reversal formation consisting of three candles. It appears at the end of a downtrend, indicating a potential shift to an uptrend.

Yes, especially when confirmed with volume, support levels, or other technical indicators. In Forex trading, the pattern appears on major pairs after a bearish move and is often used in combination with technical tools like Fibonacci retracements, moving averages, or momentum oscillators. Together, this pattern suggests that bearish momentum is weakening and bullish buyers are gaining control. Opofinance provides advanced tools on the MT5 platform, social trading options for learning from expert traders, and reliable deposits and withdrawals, which enhances the overall trading experience. With Opofinance’s robust offerings, traders can focus on improving their trading strategy with confidence, knowing they are backed by a secure and regulated platform. These strategies help manage risk and optimize potential returns when trading the Morning Star pattern.

Does the morning star work in crypto markets?

The third candle then emerges as a strong bullish candle, closing well above the midpoint of the first candle, suggesting a reversal. So in summary, with proper confirmation and optimal context, the morning star can provide helpful reversal signals for Forex traders. Using prudent stop losses is recommended in case the expected bullish breakout does not materialize.