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Morning Star Candlestick - Forex Trader’s Guide

By Stelian Olar, Updated on: Jul 12 2024.

In this article, we'll explore everything you need to know about the morning star candlestick pattern - what it looks like, what it means, and most importantly, how you can actually apply it in your own trading strategy.

I'll share examples of recent morning star candlestick formations on real charts, so you can see exactly how to identify them.

Have you ever felt like you were flying blind when reading candlestick charts?

Trying to decipher the cryptic shapes and colors, desperately hoping to find some hidden meaning that will lead to profitable trades?

I've been there too.

Candlestick charting can be like reading tea leaves if you don't know what you're looking for.

But there is hope!

With the right understanding, you can use the morning star candlestick meaning as an early heads-up for potential trend reversals.

No more fumbling in the dark!

My goal is to shed some light on this classic reversal signal, so you know how to trade morning star candlestick pattern with clarity and confidence.

Ready to transform candlestick charting from obscure mysticism to actionable trading edge?

Let's do this!

What Is the Morning Star Candlestick Pattern

In technical analysis, the candlestick morning star is a three-candle reversal pattern signaling a potential uptrend. It emerges after a downtrend and consists of:

  1. A long red candle extending the downtrend
  2. A small-bodied middle candlestick gaping down but closing near the open, forming the morning star Doji candlestick pattern
  3. A strong bullish candle gaping up from the star formed in the middle

what is morning star candlestick pattern

This sequence creates the bullish morning star candlestick formation. The star patterns show indecision, while the third candle confirms upside momentum.

For traders, identifying a morning star pattern candlestick indicates growing optimism and a possible trend change. However, the bullish reversal pattern requires verification through other indicators before pulling the trigger on a trade.

It's also worth noting the opposite pattern, called the evening star which signals a trend reversal to the downside after an uptrend.

In summary, learning what is morning star candlestick pattern it can provide chart readers with an initial signal on upcoming upward moves.

How To Read the Morning Star Candlestick

Correctly identifying the bullish morning star candlestick is key if you want to try and trade the morning star and it requires analyzing the sequence of the three candles closely.

Let's break it down day by day:

Day 1 – Downward Momentum

The first candle is long and bearish candle (black candle), continuing the existing downtrend, reflecting strong negative sentiment. It has a wide range and closes near the low.

Day 2 – Indecision

The middle "star" candle gaps down from the first candle's close, has a relatively small body and closes back up near its open which is why it resembles a Doji candle. This reflects uncertainty and indecision in the market.

Pay close attention to the gaps between candles, especially in morning star candlestick stocks, as gaps show swift shifts in sentiment. Note how candles open and closed - the first closes near the low, the middle stars near its open, and the third closes near the high.

In forex, gaps rarely occur between candles but the morning star candlestick pattern meaning remains the same - the transition from bearish to bullish sentiment over 3 candles completes the bullish morning star candlestick pattern.

Day 3 – Reversal

The third candle confirms the upside momentum by gaping up from the star candle's close and is strongly bullish candlestick (white candle).

morning star candlestick forex

Analyzing the sequence of long bearish, small-bodied, and long bullish candles reveals what is a morning star candlestick - a potential trend reversal signal.

Morning Star Candlestick Formation - Elements to Consider

When looking for a morning star candlestick reversal pattern on the charts, there are a few key ingredients to watch out for:

  • The star is a bullish sign, so first confirm the morning star emerges after a downtrend. The bears need to be in control for this reversal pattern to form.
  • Look for a long red candle to extend the downtrend.
  • Next, a Doji morning star candlestick or other small-bodied candle gaps down, reflecting uncertainty.
  • Finally, the third candle should close at least halfway into the body of the first red candle.
  • If the price was at a support level, the morning star reversal has a higher chance of success.
  • Look for larger than average trading volumes on the last green candle for confirmation because increased participation by buyers supports the uptrend reversal.

Types of the Morning Star Candlestick

The morning star is a three-candlestick bullish reversal pattern. While the basic structure is the same, there are a few variations in the middle "star" candlestick that produce different types of morning stars.

The main types of morning star candlestick patterns include:

Standard Morning Star:

The middle candle is a doji or small-bodied candle, creating the "star" shape. This shows indecision before the uptrend reversal.

Morning Star with Gap:

There is a visible gap between the first and second candle, indicating a stronger reversal signal.

morning star candlestick pattern pdf

Morning Doji Star:

The morning Doji star pattern has the middle candle as a Doji, with open/close at the same level. This emphasizes market indecision.

doji morning star candlestick

Morning Star with Large Body:

The middle candle has a relatively large real body, showing a wider trading range. This can be either red morning star candlestick or green morning star candlestick, but the red one hints at lingering bearishness before reversing.

morning star candlestick reversal pattern

Piercing Pattern:

The middle candle gaps down from the previous close but closes above the midpoint.

 trade the morning star

Difference Between Morning Star and Evening Star Candlestick Patterns

The morning and evening star candlestick pattern are closely related but have different implications.

The key differences include:

  1. Sequence: The morning star is a bullish reversal pattern that comes after a downtrend. The evening star is a bearish reversal pattern that comes after an uptrend.
  2. First candle: In a morning star, the first candle is bearish and continues the downtrend. In an evening star, the first candle is bullish and continues the uptrend.
  3. Last candle: The last candle in a morning star closes above the midpoint of the first candle, indicating a bullish reversal. In an evening star, the last candle closes below the midpoint of the first candle, signaling a bearish reversal.
  4. Confirmation: The morning star needs confirmation of a new uptrend, while the evening star needs the new downtrend confirmed.

morning star candlestick formation

How To Trade Morning Star Candlestick Pattern

Here are some tips for traders to effectively trade morning star candlestick patterns in Forex:

  • Wait for Confirmation - Don't enter on the pattern alone. Confirm the upturn by waiting for the price to close above the first candle's midpoint after the pattern forms.
  • Place Stop Loss Below Pattern - Use a stop loss below the low of the first red candle to control downside risk in case the reversal fails.
  • Consider Volume - Rising volume on the third "confirmation" candle supports a reversal. Lackluster volume may indicate a false morning star candlestick Forex signal.
  • Use With Trend Lines - Combine the morning star with ascending trend lines and other candlestick patterns like moving averages for greater chance of success.
  • Mind the Time Frame - Morning stars are more reliable on daily and 4-hour charts. Use lower time frames for entering trades after confirmation.
  • Book Partial Profits - Consider taking partial profits at the morning star's projected target, then trail stops for remainder.
  • Check Other Correlations - Factor in related currency pairs and market conditions to better contextualize the signal.

how to trade morning star candlestick pattern

With good risk management and proper confirmation, the morning star candlestick pattern can offer helpful reversal trade signals within overall Forex technical analysis and morning star candlestick pattern PDF guides. 

How Reliable Is the Morning Star in Forex Trading

According to a study by Japanese candlestick charting expert Thomas Bulkowski, the morning star pattern predicts bullish reversals with a 65% success rate when properly confirmed. The failure rate is estimated around 35%.

The morning star candlestick Forex can be a fairly reliable indicator for forex traders, but the pattern should be considered within the broader technical context for best results. When trading forex, it's important to use a reliable broker like Pepperstone to ensure smooth execution or eToro for US residents.

The reliability tends to improve when:

  • Formed at key support levels rather than random areas
  • Preceded by a strong downtrend of at least 5-10 candlesticks
  • The middle "star" candle closes deeply into the first candle's body
  • Trading volume surges on confirmation candle

On the other hand, factors that can generate false signals include:

  • The pattern forms too early in a strong downtrend
  • The middle candle is relatively large rather than a doji/spinning top
  • Existing support levels are distant from the pattern
  • Formed during a trading range rather than downtrend

So in summary, with proper confirmation and optimal context, the morning star can provide helpful reversal signals for Forex traders. Using prudent stop losses is recommended in case the expected bullish breakout does not materialize.