shooting star candlestick 7

23 Jun shooting star candlestick 7

ᑕᑐ Shooting Star Candlesticks: Patterns, Meaning, Types

This is probably part of the reason many traders call all of them hammers (or inverted/upside-down hammers). So the more obvious the level, the more traders will get trapped — and you make more money. Because when a level is obvious and the price breaks out of it, many traders will hop on the bandwagon and buy the breakout (hoping to catch a piece of the move). As a swing trader, you’re only looking to capture “one move” in the markets, and that’s it.

Candlestick Body

Shooting star candlesticks are straightforward patterns that even beginners can comprehend very easily. Investors and traders must ideally analyse the patterns that follow a shooting star for three days, to make careful and well-thought-out trading decisions. As a trader, it’s important to understand the advantages and disadvantages of candlestick patterns. Similarly, the hanging man and shooting star candlestick look very much alike. The hanging man has the small real body at the top of the candlestick rather than the bottom like the shooting star and a long lower shadow. The difference between the hammer and shooting star candlestick is that the Hammer looks like a “T” shape.

• One of the reasons for this is the unique structure – a small body with a high upper candlewick.
• A trader with open long positions would thus look to close their long position on the open of the next candlestick.
• However, as the price advances, sellers begin to step in, pushing the price back down before the close of the candle.
• As you are monitoring the market, the currency pair makes a new price high at 5.5 right before the market closes at 4.2, higher than the previous day’s close.

Taking the above chart into account, there are several steps you need to follow in order to effectively identify and trade the shooting star candlestick pattern. This is where paying attention to the color of the real body comes in handy too. The red shooting star candlestick will have a black or red body, confirming bearish potential. But the green shooting star candlestick has a green or hollow body, showing the bulls still have some strength.

• The red shooting star candlestick is considered a more powerful indicator of an oncoming bearish trend as the closing price is at the very end of the candlestick.
• The shooting star candlestick can be treated as a short entry signal the moment it forms.
• Look at previous support levels, and trend lines, or use tools like oscillators to identify potential profit-taking zones.
• For the candlestick to qualify as a shooting star, the long upper shadow must be at least twice the length of the real body.
• The shooting star and inverted hammer look alike but serve opposite functions in different market contexts.
• The occurrence of bearish trends can take anything from a few months to a few years, depending on other economic and market conditions including slowing economies, wars, geopolitical crises etc.

Don’t memorize the Shooting Star Candlestick Pattern, here’s why…

During the formation of the shooting star candlestick pattern, the price of the security goes up from its open price but there is a sudden increase in the selling pressure. The shooting star candlestick reflects a battle between buyers and sellers. During an uptrend, the price of the asset reaches a new high, and buyers may feel confident that the trend will continue. However, as the price advances, sellers begin to step in, pushing the price back down before the close of the candle.

Sometimes, traders try to predict the pattern before the shooting star candlestick candle even closes, but that’s risky. Letting the daily, 4-hour, or chosen time frame candle finish ensures you see the final real body placement and wick length. Premature action might lead you to enter a short position without the actual confirmation that the price rejected higher levels.

As you can see, in the GBP/USD 30-min chart below, the shooting star pattern appears after an uptrend and indicates a price reversal of the current trend. When I first started trading stocks, I would see these odd-looking candlestick shooting stars pop up from time to time but had no idea what they meant. I later learned that the shooting star candlestick pattern can give key insights into potential reversals in stock price trends. A shooting star pattern is formed in a stock chart when the price opens higher than the previous close, rallies during the trading session, but then reverses and closes near or below the opening price.