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Morning Star Candlestick Pattern and its Uses

This resource details the Morning Star Candlestick Pattern for forex trading.


Hello friends, we all know that trading in financial markets is exciting, but it's also important to balance this excitement with discipline, knowledge, and detailed analysis. This is where Japanese candlestick patterns come into play as one of the technical tools we use in financial analysis. These patterns help us predict future price movements. The topic of this article will be the "Morning Star" pattern that we use within candlestick analysis.

Morning Star candlestick patterns illustration
The Morning Star Candlestick Patterns

Topic: Morning Star

Type: bullish

Trend direction: reversal

Opposite pattern: Evening Star

Why is it called the "Morning Star"?

This candlestick pattern is named "Morning Star" due to its visual resemblance to a rising star in the bright hour of the morning. Thus, the name Morning Star carries a symbolic meaning. The morning star appears in the sky before sunrise, signaling the end of darkness and the beginning of a new day. Similarly, the Morning Star candlestick pattern signifies the end of a bearish market and the beginning of a bullish market in a similar fashion. Here, the long bearish market represents darkness, while the formed star candle is seen as a ray of hope for the beginning of an uptrend.

Formation of the Morning Star candlestick pattern

The Morning Star is a bullish reversal candlestick pattern that signals the end of a bearish market and the beginning of a bullish market. It consists of three candlesticks and develops as follows:

Large Bearish Candle: The first candlestick forms during a bear market period, typically appearing as a large-bodied red (black) bearish candle.

Star Candle: The second candlestick forms as a candle with a small body and a long shadow. In some cases, there may be no shadow. This star candle is usually green but can occasionally be red.

Large Bullish Candle: The market balance shifts, and the third candlestick forms. This green (white) candle indicates that prices may start moving upwards.

Once the Morning Star candlestick pattern is completed, buyers become more eager to enter the market. Now, uncertainty or imbalance is considered to have ended, and the inevitable trend reversal is anticipated.

Trading with Morning Star candlestick pattern

The Morning Star candlestick pattern is one of the candlestick patterns in financial trading. We can trade using this pattern. The emergence of the Morning Star pattern can signal the beginning of a bullish market in both the forex and stock markets. However, it is more reliable when this pattern appears at oversold levels and strong support levels. Nonetheless, it is advisable to remain cautious, consider the risk, and confirm the signal to make informed decisions.

Buy: After the close of the third candle (Green bullish candle), we can enter a buy order.

Stop Loss: The stop loss order can be placed below the lowest level of the Star candle.

Take Profit: When determining the take profit level, risk-reward ratios, resistance levels, previous highs, and other technical tools can be used.

Let's provide an example of trading with the Morning Star candlestick formation on the daily chart of the New Zealand Dollar/US Dollar currency pair:

Example of trading using the Morning Star candlestick pattern on NZD/USD.
Morning Star Candlestick Pattern on the NZD/USD.

Allow me to highlight that: There's no guarantee of always profiting in trading the Forex market. Of course, there are times when we may incur losses. What's important is to consider the risk factor and be patient. Remember that candlestick patterns, including the Morning Star pattern, may not provide a 100% success rate. It should not be used alone but confirmed with other analysis tools.

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