Trading is based on the ability to read the market. One of the very valuable ways of interpreting the current conditions on the market is observing the candlesticks on the chart. During trading, you will come across plentiful candle patterns that you can utilize to determine exact points of trade entry and trade exit.
In this guide, I want to present you with the Evening Star Pattern which is widely used to identify the reversal of the trend. You will learn how to recognize the pattern and then how to use it on the Olymp Trade platform.
Recognizing the pattern of Evening Star
The Evening Star candlestick pattern includes three different candles. It is formed when the bearish trend reversal takes place.
The first candle is a long green one. It signifies the domination of the bulls on the market. Nevertheless, it is going to an end.
The second candle can be a small doji or spinning top. You will notice that its high is almost always higher than the peak of the last candle. But it only means that the trend is now exhausted and the bears take control over the prices.
The third candle in the pattern is a long red one. It only confirms the dominance of the bears. The trend has reversed.
Pros and Cons of the Evening Star Pattern 👍👎
- Easy to identify once understood
- Reliable in predicting bearish trend reversals
- Can be used in multiple time frames
- May occasionally give false signals
- Needs other indicators for confirmation
- May be less effective in highly volatile markets
|Evening Star Pattern
|A bearish reversal pattern that typically appears at the end of an uptrend.
|Morning Star Pattern
|A bullish reversal pattern that signifies the end of a downtrend and the beginning of an uptrend.
|Three Black Crows
|A bearish reversal pattern that is characterized by three consecutive long-bodied candlesticks that have opened within the real body of the previous candle and closed lower than the previous candle.
|Three White Soldiers
|A bullish reversal pattern that is characterized by three consecutive long-bodied candlesticks that have opened within the real body of the previous candle and closed higher than the previous candle.
Trading with the Evening Star pattern at Olymp Trade
You already know the Evening Star pattern means the end of the uptrend. What it further means is that you should definitely enter a sell trade. What is the best moment to do that?
Wait for the bearish candle to fully develop. The moment it closes you should enter the trade.
What should be the duration of your trade? Well, depending on the candle timeframe you will set a different duration. For instance, trading on 5-minute candles you may keep a position for 10 or 15 minutes. This will additionally protect you against small price movements often occurring in a shorter period of time.
The Evening Star pattern is a very nice and easy method of detecting the change in the trend. It will be always from a bullish trend to the bearish one so never place a buy order when you spot this pattern.
The only thing left is to practice trading with the Evening Star pattern. The Olymp Trade demo account is an excellent place to do that. Don’t hesitate and go trading.
Wish you success!
Common Questions About Evening Star Pattern🔍
- Q: How reliable is the Evening Star Pattern for predicting trend reversals?
- A: While the Evening Star Pattern is considered a strong indicator of a bearish trend reversal, no pattern is 100% accurate. It’s always best to use additional indicators for confirmation.
- Q: Can the Evening Star Pattern be used in all time frames?
- A: Yes, the pattern can be used in various time frames, but it may be more reliable in longer time frames.
- Q: How is the Evening Star Pattern different from the Morning Star Pattern?
- A: The Evening Star Pattern is a bearish trend reversal pattern, indicating a switch from uptrend to downtrend. The Morning Star, on the other hand, is a bullish trend reversal pattern, signifying a change from downtrend to uptrend.
- Q: What other indicators can be used with the Evening Star Pattern?
- A: Traders often use support and resistance levels, trend lines, and other candlestick patterns along with the Evening Star Pattern for better accuracy.
- Q: Can the Evening Star Pattern be used for day trading?
- A: Yes, the pattern can be used for day trading. However, as with all trading strategies, it’s important to manage risk effectively.
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