Morning Star candle – The key to profit breakthrough

Morning Star Candle is a popular bullish reversal candlestick pattern in technical analysis. This pattern is formed by three candlesticks with a characteristic structure, giving investors important information about the upcoming market trend. Join Forex Trading to discover in detail what the Morning Star Japanese candlestick is right in the article below!

Overview of basic information about Morning Star candle

The Morning Star Candle is a candlestick pattern in technical analysis, often used to predict downtrend reversals and signal potential growth in the financial markets

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The Japanese Morning Star candlestick is a bullish reversal pattern that appears in technical analysis. This pattern includes three candles with a characteristic structure:

• The first candlestick is a candlestick that represents a downtrend, which can have a long body.
• The second candle is a pullback candle or doji, which represents uncertainty or loss of momentum in the downtrend.
• The third candle is a step-out candle, usually a candle that represents growth with a large body and a white or blue color.

The morning star candlestick is often considered a strong reversal sign of a downtrend. The combination of these three candlesticks shows the weakening of the selling force and the strengthening of the buying force, creating favorable conditions for the reversal of a downtrend into an uptrend.

What is the detailed structure of the Morning Star Candle pattern?

The Morning Star Japanese candlestick pattern includes three consecutive candles as follows:

The first candle in the morning star candle

The first candle in the Morning Star pattern is usually a bearish candle that represents the ongoing downtrend before the pattern appears.

Candle body:

• Long, downward.
• Showing strong selling pressure, prices dropped sharply.

Lower shadow:

• Long, accounting for a large proportion of the candle body.
• Shows the frustration of the sellers but not enough strength to push the price lower.

Color:

• Can be a red candle (bearish) or a green candle (bullish).
• However, red candles often appear more commonly.

See more: Read candlestick charts: Basic & advanced material

 

Morning Star’s second candlestick pattern

The second candle in the Morning Star pattern often represents uncertainty or loss of momentum in a downtrend of the market.

Candle body:

• Short, accounting for a small proportion compared to the candle body of the first and third candles.
• Showing hesitation and indecision on the part of both buyers and sellers.

Candle shadow:

• Short or no candle shadow.
• Shows a temporary balance between the two factions.

Color:

• Can be a red candle (down), green candle (up), or Doji candle (no change).

The third candle in the Morning Star candle set

The third candle usually represents a reversal of the trend from bearish to bullish.

Candle body:

• Long, upward
• Showing an increase in buying power, prices began to rise again.

Lower shadow:

• Long, accounting for a large proportion of the candle body.
• Shows weak resistance from the sellers.

Color:

• Always a green (bullish) candle.

Note:

• The structure of the Morning Star Candle can vary slightly depending on each specific case.
• However, the above basic characteristics still need to be ensured for the model to be considered accurate.

Meaning of Morning Star Candle and examples

The morning star candlestick is often considered a strong signal of trend reversal, especially when appearing after a series of bearish candlesticks. Let’s take a look at some of the meanings and applications of this candlestick in technical analysis!

Meaning and application of Morning Star candle

Meaning of Morning Star:

• Morning Star often appears at the bottom of a downtrend, signaling a possible trend reversal to an uptrend.
• The appearance of this set of candlesticks shows that the selling force has weakened and the buying force is gradually strengthening.
• The Morning Star candlestick is often accompanied by other reversal signals, such as divergences on technical indicators or changes in trading volume.

  

Morning Star’s application in trading

Determine the point of purchase:

• Morning Star is often used to identify potential buying points when the market is in a downtrend.
• When the morning star candlestick appears, investors can open a buy order when the price surpasses the top of the third candlestick (morning star).

Risk management:

• This candlestick pattern can be used to manage risks in existing trades.
• For example, if you are holding a short position and see a morning star candle appear, you can place a stop loss order to limit your losses if the price reverses to the upside.

Confirmation of other Japanese candlestick reversal patterns:

• The Morning Star Candle can be used to confirm other reversal patterns, such as double bottom, and triple bottom,…
• Combining this set of candlesticks with other reversal patterns can increase the reliability of the reversal signal.

Market sentiment analysis:

• Morning Star can be used to analyze market sentiment.
• The appearance of the Morning Star candlestick shows that the selling force has weakened and the buying force is gradually strengthening, this is a sign that market psychology is changing from pessimism to optimism.

Example of Morning Star Japanese candlestick analysis

Chart 1:

• • Candle pattern: Morning Star
  • Previous trend: Downtrend
  • Signal:
    • Price crosses the downtrend line.
    • Price crosses the top of the Morning Star Candle.
  • Forecast: The trend may reverse to increase.
  • Entry point: Entry passes the top of the Morning Star Candle
  • Stop loss: Stop loss below the bottom of the first candle

Chart 2:

Describe:

• Previous trend: Down.
• Candlestick pattern: Morning Star, bullish engulfing candle.
• Confirmation: Candle 3 closed higher than candle 1.
• Forecast: The trend may reverse to increase.

Entry point:

You can place a buy order when the price surpasses the highest level of candlestick 3.

Stop loss:

Place a stop loss order below the low of candlestick 2.

Note:

• Morning Star is just a candlestick pattern and does not guarantee successful trading results.
• Investors should learn how to use this candlestick set effectively and combine it with other candlestick sets such as marubozu candlesticks, and Spinning Top Candle … to increase the likelihood of success and hitting TP when trading.
• You should refer to other sources of information to have full knowledge about the Morning Star Japanese candlestick pattern.

See more: Optimize trading with IC Markets Exchange

Important notes about Morning Star Candle when trading

When using Morning Star in trading, it is important to keep some of the following important factors in mind:

Signal Confirmation

Always wait and confirm the signal of the Morning Star candlestick with the next candlestick. A strong bullish candle after this set of candles will strengthen the reliability of the reversal signal.

Assessing the Market Context

Don’t just rely on one signal without considering the market context. Consider the overall trend, market structure, and influencing factors to ensure your trading decisions are shaped by the overall context.

Use Additional Technical Tools

Combine Morning Star candlestick with other indicators and technical tools such as RSI, MACD, or Fibonacci to increase signal accuracy and support trading decisions.

Implement Risk Management

Set stop-loss consciously to minimize risk and protect your position. Determine in advance the risk level for each trade and adhere to it strictly.

Continuous Market Monitoring

Always keep an eye on market movements and be ready to adjust your trading strategy if needed. The market is always changing and being flexible will help you deal with unexpected changes.

Practice and Patience

Practice trading with Morning Star Candle on a simulated account before applying to a real account. Patience and perseverance are the keys to success in trading.

Conclude

The Morning Star Candle pattern is a useful tool for technical analysis and identifying potential buy/sell points. However, it should be noted that the morning star candlestick is only a potential signal, not a certain signal. Therefore, investors need to combine it with other analytical methods to confirm trend reversal signals. Forex Trading recommends that you set a stop loss order to limit losses and follow trading discipline to ensure the safety of your investment capital. 

frequently asked Questions

Is Morning Star a solid signal to buy?

No, Morning Star is just a potential signal. You need to combine it with other technical indicators to confirm.

How to distinguish Morning Star from other bullish reversal candlestick patterns?

Morning Star has a different structure compared to other bullish reversal patterns such as Hammer, and Bullish Engulfing,… Therefore, you can easily distinguish Morning Star by carefully observing the structure of the model.

What types of assets should Morning Star be used for?

Can be used for many different asset types, including stocks, foreign exchange, commodities, etc. However, the effectiveness of the Morning. Star candlestick may vary depending on the asset type