Evening Star Candle is a form of Japanese candlestick that is frequently used as a technical analysis tool. The purpose is to detect reversal signals in the market, so it is favored by many investors. Today, let’s join Forex Trading to learn more details about how to use this candlestick pattern in Forex.
How is the Evening Star candle used in investment?
The Evening Star candlestick chart pattern is also known as the evening star candlestick chart. This is a candlestick pattern that often appears in price charts. It is often considered a potential reversal signal from an uptrend to a downtrend.
Instructions for trading forex with the Evening Star candlestick pattern
To trade the Evening Star candle stick pattern, investors need to determine the candlestick pattern. Look for three consecutive candles on the map. The first candle is a large blue candle, the second candle will be shorter than the first candle. Finally, a negative candle can enter along with the body of the second candle.
Identifying additional factors is also necessary. Investors need to consider whether trading volume has increased or not. Use some indicators for confirmation such as MACD indicator, MA indicator. Once the pattern has been confirmed, the investor can place a short-term order.
The profit-taking target will depend on the technical analysis tool the investor uses. Please remember to always manage risks in all cases. This will help you limit losing money in the investment market.
See more: Read candlestick charts: Basic & advanced material
Instructions on how to identify the Evening Star
The pattern Evening Star candle appears right when the opening price of the trading session is near the highest peak. They will then increase further and eventually end up trading lower than the high. Looking at the chart Evening Star candle, the candlestick has an inverted shape, a small body, and long shadow.
To identify the evening star candlestick pattern, investors need to identify three main candlesticks. First, you must determine whether the current market trend is increasing or decreasing. If you see a large bullish candle, it is the result of the buying side being higher than the selling side.
At this time, short-term trading is quite difficult, investors should focus on the long term. If the second candle is a small candle or Doji candle, this is a sign that the market is increasing but not too strong. This candle will usually have a higher distance.
Analyze some basic candlestick charts in 12 candlestick reversal patterns
Basically, candlestick patterns include bullish candlestick reversal patterns and bearish reversal candle patterns. To better understand these candlestick patterns, let’s follow along now.
Analyzing the Hammer candlestick pattern
The hammer candlestick pattern is also known as the hammer candlestick pattern. The hammer pattern appears when the opening price, high price, and closing price are almost the same. In addition, the shadow of the lower candle is twice as long as the body of the candle. If the high and the close are equal then a strong bullish Hammer candle is formed by the market.
Conversely, if the opening price and high price are equal, the Hammer pattern is considered less optimistic and cannot return to the opening price. The longer shadow of the lower candle means the market is trying to find support.
12 reversal candlestick patterns including Inverted Hammer
The formation of this candle mainly occurs at the end of a downtrend. And this candle also acts as a warning to investors about price reversals. This candle occurs when the opening price, low price and closing price are approximately equal.
When the low price and opening price are equal, the Inverted Hammer candlestick is formed and is considered a stronger bullish sign than when the low price and closing price are the same. After a long downtrend, the formation of the candle means the market is bullish.
Analyzing patterns of Evening Star candle in Forex investment
The pattern Evening Star candle consists of three candles. The big bullish candle is the candle on day 1. This is followed by a small bullish or bearish candle on day 2 and finally a large bearish candle on day 3.
New highs are created on the first day. Day 2 begins with an extended trip, however, the price will not increase any further. Day 3 starts with a gap and the price could be pushed even lower.
Doji candlestick chart analysis
The Doji candlestick pattern is often found at the bottoms and tops of trends and is therefore considered a potential sign of price reversal, but the Doji can also be considered a continuation candlestick pattern. After opening, prices are pushed up and will likely decrease. However, the market will not be able to hold the price lower and then push the price back to the opening price.
Instructions for combining Evening Star candle effectively with indicators when analyzing
Combining the evening star candlestick pattern with indicators will help investors trade more effectively.
Evening Star when combining MACD in analysis
If using MACD as a determining tool. Look for the MACD histogram bars below the 0 line. Or the point of intersection between the two MACD moving averages. Then you can safely place a trade when the evening star candlestick pattern is formed and you see a bearish signal from the MACD indicator.
Combination Evening Star candle with RSI indicator
When applying the evening star candlestick pattern with the RSI index, investors should focus on overbought conditions in an uptrend. If the RSI is near the overbought zone, the trend will reverse. Therefore, when the evening star candle appears, investors can confidently trade when the RSI indicator gives a new signal of a trend change.
See more: Discover Exness – The world’s leading Broker
Combine the evening star candlestick pattern with a volume-related indicator
Investors can use volume indicators as a tool to track market activity. Using this tool, investors can know the order volume. And the price movements in the market at that time. When combined with the evening star candlestick, it will confirm whether the trend is reversing or not. If a pattern appears and trading volume is high, there will be selling pressure occurring at this time.
Conclude
Evening Star candle is a useful tool for both experienced and inexperienced investors. Using this candlestick pattern is quite simple. However, sometimes they also have discrepancies in the numbers. To be able to apply it proficiently, investors need to cultivate and practice more. Hopefully, the information that Forex Trading will be useful to readers.
FAQs
What does the evening star candlestick pattern help investors see?
The evening star candlestick pattern helps investors see the competition between the buying and selling sides.
If the Evening Star pattern appears after a strong uptrend, what is the warning?
It warns of buyer weakness and a correction is likely in the future.
What is the structure of the evening star candlestick pattern?
The evening star candlestick pattern is shaped like an upside-down candle. They have small bodies and long shadows at the top.
