The evening star candlestick acts in theory as it does in reality, as a bearish reversal of the upward price trend 72% of the time. However,
with a 71 frequency rank, it may be a long time before you see one in the bush. The middle candlestick in the Evening Star pattern, i.e., the Star, is the first indication of weakness in the uptrend. It indicates that the buyers were unable to push the price up much higher despite the gap between the real bodies of the middle candlestick and the candlestick that preceded it. This weakness is also reflected in the small real body of the middle candlestick that indicates, which rendered the color of the second candlestick as not important.

The Evening Star candlestick is a three-candle pattern that signals a reversal in the market and is commonly used to trade forex. Correctly spotting reversals is crucial when trading financial markets because it allows traders to enter at attractive levels at the very start of a possible trend reversal. This evening star candlestick acts as a bearish reversal of the up trend since the breakout is downward. A downward breakout occurs when price closes below the bottom of the
candlestick pattern. In this example, the new downtrend is a lasting one, but it takes its time trending lower.

• In this final example, a target was again placed at a level that offered double the reward versus the initial risk.
• The chart example above shows how an uptrend ended abruptly directly after the formation of a forex evening star pattern.
• The Morning Star and the Evening Star have a Doji or a Spinning Top as the second candlestick in the pattern that gaps away from the preceding can…
• When trading the formation, traders typically look for confirmation signals, such as additional indicators or technical analysis tools, to strengthen the formation’s reliability.
• Here you can find our Candlestick pattern archive with many articles covering the subject.

As such, you might want to consider taking an evening star only if the VIX is in an uptrend, signaling that market participants are becoming more bearish. We research technical analysis patterns so you know exactly what works well for your favorite markets. If you’re interested in trading using technical analysis patterns like the Evening Star, have a look at our reviews of these regulated brokers available in to see what tools they offer. The Evening Star pattern can be observed in the EUR/GBP chart below, where there is an established uptrend leading up to the formation of the reversal pattern.

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Whereas, The Morning Star is a candlestick pattern that appears at the end of the downtrend and signals upside reversal. Let’s say the price of Bitcoin has been experiencing a strong uptrend over the past few days. As the price continues to rise, a large bullish candle forms, representing a day of significant gains for Bitcoin. This bullish candle indicates that buyers are in control and driving the price higher, so our trader decides to keep holding their funds.

We need additional filters or conditions to validate the signal, and remove a lot of bad trades. In addition to this, it’s important to use the evening star with the right timeframe and market. We recommend that you use backtesting to ascertain the best markets and timeframes for the pattern. Reversal patterns mark the turning point of an existing trend and are good indicators for taking profit or reversing your position. Generally, trend reversal patterns indicate that a support level in a downtrend or a resistance level in an uptrend will hold and that the pre-existing trend will start to reverse.

The trader would look to short sell the market as the Evening Star is a bearish trend reversal pattern. A trader would thus look to close any open long position and short (sell) the market. A trader could either initiate a short position on the open of the next candlestick, or place a sell order at the close of the last candlestick in the formation. While candlestick patterns like the evening star are said to be reversal patterns, on their own they’re not accurate enough for us to act on.

The Thanksgiving Holiday Effect And Seasonality In Stocks (Black Friday Effect)

As such we might want to only take an evening star above the upper Bollinger band if the ADX is over 20, which signals high volatility. Then we know that the market has moved a significant distance to the upside. As such selling pressure builds up and pushes the market back below the open.

Use Seasonality and Time-based Filters

Key takeaways A morning star pattern is a bullish 3-bar reversal candlestick patternIt starts with a tall red candle,… Generally, a bearish candlestick on day 2 is a stronger indicator of an impending reversal. Bear are able to press prices even further downward, often eliminating the gains of day 1. The Evening Star consists of three candlesticks, with the middle candlestick being a small Star that gaps away from the first candlestick. The first candlestick in the Evening Star must be supportive of the uptrend and, hence, must be light in color and must have a relatively large real body.

It’s advisable to consult various technical indicators to predict price movements rather than rely solely on the signals provided by one. Most markets have some form of seasonal or time-based tendencies, meaning that they are more bullish or bearish at certain times. It could be that the market is more prone to going up on certain days of the week, parts of the month, or at certain hours of the day. With the evening star, we might choose to only take a trade if the market has entered overbought territory, meaning that it has moved excessively to the upside.

How Does the Evening Star Pattern Use These Prices?

By understanding its characteristics, using it in conjunction with other technical analysis tools, and being aware of the risks and benefits, traders can improve their chances of success. As with any trading strategy, it is essential to manage risk and maintain discipline to achieve consistent results. As we’ve already established, the evening star candlestick pattern usually occurs at the end of an uptrend and signals a potential bearish trend reversal (though not always!). It starts with a long bullish candlestick, followed by a short candlestick, and ends with a long bearish candle. The evening star is a bearish candlestick formation that appears at the end of an uptrend.

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A doji candle doesn’t have a body as the opening and closing prices are virtually the same. The evening star is a long white candle followed by a short black or white one and then a long black one that goes down at least half the length of the white candle in the first session. The evening star signals a reversal of an uptrend with the bulls giving way to the bears. The gap between the real bodies of the two candlesticks is what makes a spinning top a star.

However, the difference is that a shooting star refers to a single candlestick with a long upper shadow and small lower body, whereas the evening star is a three-candlestick pattern. Both the evening star and evening doji star tend to appear at the end of an uptrend and signal a potential bearish trend reversal. In addition, they both start with a large bullish candlestick and end with a large bearish candlestick. When trading the formation, traders typically look for confirmation signals, such as additional indicators or technical analysis tools, to strengthen the formation’s reliability.

Click the “+” icon in the first column (on the left) to view more data for the selected symbol. Scroll through widgets of the different evening star doji content available for the symbol. The “More Data” widgets are also available from the Links column of the right side of the data table.