Morning Stars: How to Trade the Morning Star Candlestick Pattern

Morning doji star is a three-candlestick bullish reversal pattern that frequently appears at the bottom of a downtrend. Like the Doji star candle pattern, the morning Doji star pattern also appears in a downtrend and indicates a bullish reversal. However, the difference comes in the shape of the body of the middle candle, hence the Doji candle. In Doji Morning Star, the opening and closing prices are not the same, while in the Doji Star pattern, it usually has the exact opening and closing price, making it look similar to the letter + sign. To avoid false signals, the most effective way is to confirm the trend reversal with other technical indicators.

  • When found in a downtrend, this pattern can be an indication that a reversal in the price trend is going to take place.
  • A doji (dо̄ji) is a name for a trading session in which a security has open and close levels that are virtually equal, as represented by a candle shape on a chart.
  • As mentioned earlier, this gives extra credibility to the reversal signal.
  • Technical analysts often confuse the morning doji star with other candlestick patterns.

While traders will frequently use this doji as a signal to enter a short position or exit a long position, most traders will review other indicators before taking action on a trade. The evening doji star candlestick pattern is the mirror opposite of its early-rising sibling. The final candle is bearish and moves well with the first candle’s real body instead of doing the same thing in the opposite direction. It is considered a bullish reversal pattern because it forms around the lower end of a downward price swing and can initiate the beginning of a new upswing. The pattern shows that the bears are losing steam and the bulls are stepping into the market to seize control. This pattern is considered a strong indication of a potential bullish price reversal.

How to Spot a Morning Doji Star Pattern

Bears were unable to continue the large decreases of the previous day; they were only able to close slightly lower than the open. Day 3 begins with a bullish gap up, and bulls are able to press prices even further upward, often eliminating the losses seen on Day 1. The first part of a Morning Star reversal pattern is a large bearish red candle. Considering the above, here are some tips to easily identify and trade the morning star Doji pattern.

Targets can be placed at previous levels of resistance or previous area of consolidation. Stops can be placed below the recent swing low, as a break of this level would invalidate the reversal. Since there are no guarantees in the forex market, traders should always adopt sound risk management while maintaining a positive risk to reward ratio.

Moreover, combining the indicator with the Doji Morning Star adds a confluence in that anticipated move and confirms the direction of the trend. A trader will take up a bullish position in the stock/commodity/pair/asset as the morning star forms in the third session and rides the uptrend until there are indications of another reversal. The chart above has been rendered in black and white, but red and green have become more common visualizations for candlesticks.

Morning Star Candlestick Pattern Backtest

Understanding the Morning Doji Star pattern is crucial for any forex trader seeking to identify potential reversal opportunities and make informed trading decisions. Traders can use the morning doji star pattern to identify potential bullish reversal patterns in the market. However, it is important to use the pattern in conjunction with other technical analysis indicators and risk management tools to make an informed trading decision.

Is morning doji star bullish ?

Both the trendline break and the classic Morning Star pattern could have given traders a potential signal to go long and buy the Midcap 400 exchange traded fund. To avoid making such a mistake, use a fibonacci retracement level in conjunction with price action to confirm a bullish reversal, as shown in the example above. The beauty of star patterns is that, unlike other reversal patterns, they can be traded in a variety of ways, as we will see in this section. If the third candle closes above the body of the second candle, no further confirmation is required, and the next candles have a 90% chance of reversing the trend.

What is a Morning Star Candlestick?

By comparing two different SMAs, the ‘SMA50, SMA200’ option only detects stronger trends. When the trend is weak and the condition above is not met, evening star doji no patterns will be detected. Spinning tops are quite similar to doji, but their bodies are larger, where the open and close are relatively close.

In this example, the third bar nearly closes above the midpoint of the first. The trader places a buy trade with a stop loss below the setup and a take profit at the next resistance level. Candlestick charts can be used to discern quite a bit of information about market trends, sentiment, momentum, and volatility. The question is how the Doji Morning Star differs from the traditional Doji. Basically, the traditional Doji candlestick indicates market indecision, while the Morning Star signals the likelihood of a bullish reversal. Also, the Doji pattern may appear in an uptrend or downtrend, while the Doji Morning Star only appears in a downtrend.

How to Trade the Morning Doji Star Pattern takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. Generally, a trader wants to see volume increasing throughout the three sessions making up the pattern, with the third day seeing the most volume.

Similar Candlestick Patterns

It is a valuable tool for traders and investors to identify potential trend reversals and the resulting trading opportunities. Candlestick patterns help traders analyse and forecast price movements in financial assets. Although there are numerous formations, some are more reliable than others, and the morning doji star is one of the more dependable ones. This article delves into the definition of morning doji star and lists the technical analysis techniques you can use when trading with this formation.

Before we discuss the optimal morning doji star candlestick trading strategy, let’s discuss how most traders start the day off wrong and get mixed results with this pattern. You can combine the Morning Star pattern with other technical analysis tools and indicators. In fact, you should use other tools to confirm the pattern anytime you are trading it.