Morning Star candlestick pattern is also known as “morning star”. This pattern is one of the reliable candlestick reversal signals. It indicates the possibility of the market changing from a downtrend to an uptrend. This is a pattern that attracts the attention of traders. Especially attractive to those who prefer price action analysis methods. Let’s learn more about the concept what is Morningstar and its uses with Forex Trading!
Candles What is Morningstar?
Along with the concept what is Engulfing, what is Morningstar is probably familiar to investors today. The Morning Star candlestick pattern signals a reversal from a downtrend to an uptrend. The pattern is most easily seen at the end of a downtrend. This shows that the market is about to change direction. Some traders view this pattern as a more complex version of the Bullish Harami candle.
Candles What is Morningstar?
What is Morningstar ? It is also known as the Morning Star Pattern or the morning star candlestick pattern. This is a 3 candlestick pattern that often appears at the end of a downtrend. It signals that the market is starting to reverse upward. The very presence of the pattern signals the end of the bearish trend. The purpose is to start a new upward price trend.
The benefits that the Morning Star candlestick model brings
The concept of what is Morningstar often attracts the attention of many investors. However, not everyone has a deep understanding of its meaning and usage. So, we will clearly explain the appearance of the Morning Star pattern. At the same time, we provide information on what effective trading signals can be achieved.
- The appearance of the pattern at the end of a downtrend is a notable sign. It shows investors that prices are likely to rise again. At the same time, the model suggests this could be a good time for them to buy.
- Sometimes, the Morning Star pattern also appears during an uptrend. At this time, it is a signal that the price is likely to continue to go up in the coming period.
- If you combine the three candles of the Morning Star pattern, they will form a Hammer candlestick pattern. Both of these patterns indicate the possibility that the market will reverse and begin to increase in price. However, the signal the Morning Star model emits is considered safer and more reliable.
- Additionally, traders can get a deeper insight into market sentiment. They exploit through the characteristics of each individual candle.
See more: Read candlestick charts: Basic & advanced material
An example of the usefulness that the Morning Star candlestick model brings
- The first candle in the Morning Star candle is a large red candle. It signifies that sellers are still dominating the market, causing prices to continue to decline.
- The second candle in the Morning Star candle is a doji candle. It represents the struggle between the buying and selling sides. At this time, buyers are gradually increasing their presence. Meanwhile, the sellers showed signs of hesitation and reduced selling momentum. The market is starting to return to balance.
- Candle 3 is a large bullish candle in what is Morningstar showing that the buyers have gained the upper hand. Or even that part of the selling side switched to buying. This causes purchasing power to increase even more, pushing prices up again. This thorny rise of the buyers makes the sellers hesitant to accept large losses.
How to distinguish and recognize the Morning Star model
The internal structure what is Morningstar is different from most other Japanese candlestick patterns. Therefore, the identifying characteristics of this model are also very easy to remember:
- The first candle in the pattern is always a bearish candle (red) with a fairly large candle body. The longer the length of the candle body, the clearer and stronger the signal.
- The second candle can be a green candle or a red candle. Identifying characteristics are often small bodies and the shape of Doji or Spinning Top candles.
- The third candle must be a strong bullish candle (green). It is easily recognizable with its large body. The length of the candle body must be at least 1/2 to 3/4 of the length of the first candle.
- The gap (GAP) between the second candle and the remaining two candles is larger. Thus, the efficiency of the model is higher.
- The pattern often appears at the bottom of a strong downtrend.
How to trade with the Morning Star model
Like trading with Fakey , trading with concept what is Morningstar is very easy to do but highly effective. We will provide the most effective and popular trading methods with Morning Star.
Simple trading method with What is Morningstar
- Entry point: Open a BUY position as soon as the pattern is complete. That is, at the closing price of the third candle.
- Stop loss: Place a stop loss order a few pips below the pattern’s lowest price.
- Take profit point: You can set a take profit target at the nearest resistance level. But make sure the reward/risk ratio (R:R) is at least 1:1 or 1:2. Additionally, if the trend continues to expand, the R:R ratio could reach 1:10.
Overall, this is a simple and effective trading method with the Morning Star candlestick pattern. However, you should combine Morning Star candles with other technical indicators. The main purpose is to determine entry points and capture the trend more accurately.
The morning star candlestick combines with the support line
In this approach, the support zone is viewed as a price resistance area. At the same time, the zone is considered an indicator for a bullish reversal. If the concept what is Morningstar appears in this area, the possibility that the price will increase sharply is very high. This is the time when you can safely enter orders to seek big profits.
Attention:
- Watch the chart on the 5-minute timeframe (M5). How to enter an order can be done according to the following instructions:
- When the price touches the support zone and the Morning Star candlestick is formed, you can immediately enter a BUY order at the closing price of the 3rd candlestick.
Morning Star candlestick combined with the RSI indicator
The RSI indicator has always been one of the most powerful tools for analyzing price trends. When combined with the model what is Morningstar, the reversal signal becomes extremely accurate. This will help open up ideal opportunities for investors who want to catch the bottom and make profits.
Regarding the time to enter the order, the RSI indicator surpassed level 30 in the oversold zone with the appearance of the Morning Star candlestick pattern. Traders can open a BUY order at the closing price of the third candle.
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Notes when trading with candles What is Morningstar
Investors should follow some important notes to get the best results:
- To increase the probability of success, do not rely solely on the Morning Star candlestick pattern. It is best to combine with other technical analysis indicators such as RSI, MACD… The purpose is to have a more comprehensive view of the market.
- When the market is in a sideways phase, it is best not to make transactions. Because thanks to this, the reliability of the model in this situation will be significantly reduced.
- If the first candle has lower trading volume, this indicates a possible price reversal.
- According to the original theory, if the closing price of the third candle is higher than the price of the first candle, the stronger the buying pressure.
Conclude
Above is all the content related to the Morning Star candlestick model. Hopefully this information will assist you in investing forex more effectively. Practice with the Sao Mai model on a demo account before real trading. Forex Trading will be your companion in conquering what is Morningstar
Frequently Asked Questions about What is Morningstar
Under what conditions does the Morning Star model work well?
Morning Star usually performs well when the market is well known. It is in a clear downtrend and trading volume increased as the pattern emerged. The effectiveness is also higher when combined with other technical indicators.
How to trade based on the Morning Star model?
When the Morning Star pattern completes, traders can place an order to buy the closing price of the third candle. The stop loss can be placed below the low of the pattern. At the same time, the take profit point should be aimed at the nearest resistance level or at an appropriate profit/risk ratio.
Does the Morning Star pattern always guarantee a reversal?
Are not. By definition, the Morning Star is a reliable reversal pattern. However, there is no guarantee it will always lead to a change in trend. To increase the likelihood of success, this model should be combined with other factors such as trading volume, technical indicators and overall market trend.
