What is the difference between Evening Star & Morning Star candlestick patterns – How to interpret them?

Do you want to know how to use Evening Star & Morning Star candlestick patterns? Watch our latest video and find out what are the steps to follow in these patterns, to get the best out of your trading.

Evening Star & Morning Star candlestick patterns – What are their secrets?

Hello, traders! Today, we are going to go over two Candlestick patterns that are very popular and common in Forex Trading. They are called, “Evening and Morning Star Candlestick patterns”, and the only differences are we talking about reversal at the bottom, so from bear to bull market or from bull to bear market, and the top of the trading charts.

So, let’s go first and review the Evening Star pattern. So, Evening Star Candlestick pattern is, as I said, one of the most common reversal patterns. It has three candles and the first rule or step to follow in this pattern is that it must be at the end of an uptrend, so you must find a chart that has a clear uptrend like we have it now, here. This is pretty extreme uptrend, as you can see, we went almost vertically 300 pips up in the Euro/Dollar. And then, we look for three consecutive candles. The first candle should be long and bullish, so we are still here, as you can see, here, in an uptrend, the middle candle should be a candle that shows indecision by traders. So, it’s the best two candle to look in this form, are Doji candles, as this is the case here, so you can see that we have long weak to the upside and long weak to the downside, with a very short body. And then, the third candle should be the big, long red bearish candle. So, we, more or less here, this shows that we are in the uptrend, but right now, we will correct and we will start pushing to the downside and look at these three candles and they actually tell you the full story. The first candle, long healthy uptrend candle, then you have indecision, the market has not decided. Is it going to continue to the upside, or is it going to correct to the downside? And then it’s a decision time, the third candle, huge long red candle, which, more or less, then, tells you that the market is reversing, and you should enter the mode sell rally. So here, you wait for rally and somewhere around here you could have start thinking about selling the pair we need the Stop-Loss above the previous high and then look for a downside move, and you can see that here, we are reversed, here we created a lower high, and then we pushed a lower more than 300 pips. So, as I said, it’s a pattern for a trend identification, and as soon as you have the pattern here, as soon as you see that this is an Evening Star pattern, then you are good to sell.

This is, more or less, the same scenario here, in the Dollar/CAD. We have an uptrend, we have three candles here, we have consecutive long bullish candles, then you have a Shooting Star candle, so you have a long weak to the upside, but we close at the bottom and then, you have a long bearish candle, another Shooting Star. Here, you can see it, this is all a big bearish sell signal, and then you can see that the price pushes below, and from here, we, more or less, start thinking about entering the trade. So, we are entering the trade, we are then talking about 70-80 pips profit. Of course, the Stop-Loss will be above the previous high. So, this is, as far as Evening Star Bearish pattern is concerned.

Let’s now look at the Morning Star pattern. As you can see, everything is the same, just on the other side, vice-versa, so, it’s a reversal pattern. Again, we are talking about three candles and we are looking to identify a short-term bottom in a downtrend. After we identified the first bearish long candle, we look for the more smaller candle, which, as we said, is either, in this case it’s a Hammer, or a Doji. In this case, as I said, it’s a Hammer, so after we have a long continuation after the Hammer, and then, the third one is a long heathy candle, which this, actually, set up of three candles indicates that it’s time to start pushing higher after, or as you can see here, one low, second low, third low, so consecutive new lows and then we push higher and, if you just wait for here, so if you entered your trade here, at 1.2480, and you will put your Stop below 1.2450, and then, you could have gained a lot of pips, 60-70 pips, if you aimed to close your position at this high.

So, everything is the same, downtrend ends after we have a trend reversal, and then we look to push higher. Look at this example in Dollar/Yen hourly chart. Again, the downtrend, new lows, you can see new low, new low, new low, new low, again a long, red candle, we have a Doji candle, we can see long weaks on both sides, and then, big, healthy, green candle. This is a classic Morning Star pattern, and you can see that then we pushed higher to shake off some bad positions. So, we reviewed, just to recap, two very common and popular candlestick patterns, Evening and Morning Star patterns, that are used for trend reversals, and since we are talking about trend reversing, then it also offers us a good chance to limit our potential losses, given that, in this case, a Morning Star, you need to put your Stop-Loss below the previous low and then, look for the first resistance on the chart, to close your trade.