The nomenclature of candle formations is very figurative, sometimes even poetic. Today's pattern is the Evening Star pattern. Sounds romantic, doesn't it? But let's get to business.
Candle patterns are a good way to read the current market conditions. There are dozens of candle patterns you can use for technical analysis. These can allow you to determine where exactly to enter or exit trades even without using technical indicators. One candle pattern regularly used to determine trend reversal is the Evening Star candle pattern.
This guide will teach you how to identify this pattern. Then, I'll show you how to trade with it on the IQ Option platform.
How to identify the Evening Star candle pattern on IQ Option
What is an evening star pattern?
The Evening Star pattern is one of the most popular candlestick patterns. This pattern is very effective compared to others, so it is worth getting to know it better.
The Evening Star pattern consists of 3 candles. It's a bearish reversal pattern.
The first candle is a long bullish candle. This shows that the bulls still dominate the market. However, the bullish trend is approaching exhaustion.
The second candle is a small doji or spinning top. In most cases, the high of this session will be higher than that of the previous bullish candle. However, as the prices went higher, the bears stepped in bringing them down.
The third candle is a long bearish candle. This is an indicator that the trend has reversed and the bears are taking market dominance.
How do you trade Evening Star candlestick pattern on IQ Option
If you spot an Evening Star candle pattern, you know that the uptrend has ended and the only way to trade is by placing a sell order. But where exactly do you enter your trade?
You'll need to wait until the first bearish candle forms completely. Your trade entry should therefore be at the closing price of this bearish candle.
Now, for how long should you hold a position? This largely depends on the candle interval. For example, if you're using 5-minute candles, you can hold the position for 10 to 15 minutes. This makes it easier to shield yourself from small price fluctuations that occur during shorter time frames.
Is morning star a good pattern?
The Evening Star pattern occurs frequently in the foreign exchange market and other liquid markets. It is an easy pattern to spot. It meets the criteria to be a good pattern for trading.
The Evening Star candle pattern is one of the easiest ways to identify a trend reversal from bullish to bearish. Any time you see this pattern, never try to enter a buy position.
Trade Evening Star pattern also when the market is in a downtrend. In a downtrend wait for a correction. If the upward movement of a correction ends with the Evening Star pattern, studies show that this pattern very often marks the end of a correction and is followed by a continuation of the main downtrend.
Remember also that Morning Star Candlestick has its reverse twin brother, which is Morning Star Pattern. The latter appears as a bullish reversal. Both patterns are known for their fairly high effectiveness.
Now that you know what the Evening Star candlestick pattern looks like, head over to your IQ Option practice account. Patiently wait for it to develop on a Japanese candles chart and trade it like you've learned.
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