Featured image by Comfreak from Pixabay
The shooting star is a fairly popular pattern among financial market traders. It is easily recognizable and reliable enough.
However, it does not appear as often as many would like. In addition, traders don’t refer to it very actively on the price charts of currency pairs. This is because the model assumes a gap between the star and other candles. Although this condition is not necessary, it significantly enhances the signal.
In this article, we discuss what this pattern looks like, how it forms, and how to enter the forex market with the shooting star candlestick strategy.
Image by SFIO CRACHO
Learn to Identify the Shooting Star Pattern
The requirements for its formation are:
- The top candle wick should be at least twice as large as the candle body
- The lower shadow should be absent or not more than 10% of the body of the candle
- The body of the candle should be small in relation to the upper shadow
- The color of the candle does not matter
RELATED ARTICLE: HOW TO MANAGE YOUR FINANCES IN UNCERTAIN TIMES
Understand Why This Figure Appears
Often, a shooting star rolls back from a significant level of support-resistance. This is evidenced by the presence of a long candle wick.
However, this is not always the case. A shooting star may mean that the uptrend has only lost its strength. It is possible that the impulse will come after some time of remaining flat. It is also worth considering that the shooting star is not the strongest figure in the price action system.
Recognize Signal Amplification of the Shooting Star Model
Consider the following:
- The longer the upper shadow of the falling star and the smaller its body, the stronger the pattern
- The absence of the lower shadow of the star enhances the signal
- A bearish candle of this pattern is considered stronger than a bullish candle
- The presence of a gap between the star and the previous candle strengthens the pattern
- If a shooting star appears near the resistance level but does not pierce it with its body, then this strengthens the model
Know When to Enter a Deal
The formation of a shooting star candlestick does not guarantee anything. You must wait for confirmation. As always, this confirmation is the next candle formed after the pattern.
Moreover, it should be bearish with a sufficiently large body. If there is a gap in the pattern, the bearish candle should block it. The best time to enter into a deal is at the close of such a candle. And if the body of a shooting star breaks through the resistance level, then you should not risk entering a deal.
Let This Pattern Lead You Toward More Profitable Trades
A shooting star is a simple candlestick figure. Understanding the conditions for its formation will help you to navigate the financial market in a timelier manner and enjoy more profitable trades.