How To Trade The Morning Star Pattern And Evening Star Pattern on eToro

In the world of trading, identifying patterns and trends can lead to profitable outcomes. Among various strategies, reversal candlestick patterns like the Morning Star and Evening Star patterns are popular for predicting trend reversals. This article delves into the intricacies of these patterns and explores their practical application on the eToro platform.

Understanding the Morning Star and Evening Star Patterns

🌞 The Morning Star Pattern

The Morning Star pattern is a bullish reversal pattern that occurs at the end of a bearish trend. This pattern consists of three candles:

1. A long bearish tail or shadow
2. A Doji or Spinning Top with a small body, suggests indecision among buyers and sellers
3. A bullish candle with a body longer than its tails, indicating a potential trend reversal

While gaps between the candles are sometimes considered crucial for validating a Morning Star pattern, they may not always apply in all markets, such as forex. As long as the pattern adheres to the general descriptions and receives confirmation from the volume, it can be considered a valid Morning Star pattern.

🌙 The Evening Star Pattern

The Evening Star pattern, the bearish counterpart of the Morning Star, is a bearish reversal pattern that appears at the end of a bullish trend. It also comprises three candles:

1. A long bullish candle
2. A Doji or Spinning Top with a small body, indicating market indecision
3. A bearish candle with a body larger than its tails, suggesting a potential reversal to a bearish trend

As with the Morning Star pattern, the second candle is crucial for validating the Evening Star pattern. The first and third candles serve mainly as confirmations.

Trading the Morning Star and Evening Star Patterns on eToro

These patterns typically develop at the end of a trend and in highly volatile markets. They can be identified across various time periods, and trend lines are not necessary for their analysis. The primary focus should be on the position of the second candle relative to the first and third candles.

Consider the following examples from eToro:

🍏 Apple (AAPL) – Morning Star Pattern

In this example, the Morning Star pattern developed after a downtrend. It began with a bearish first candle, followed by a Doji with long tails, and concluded with a bullish third candle. Notice the varying tail lengths and the absence of trend lines. The second candle is much lower than the first and third candles, confirming the reversal after the third candle.

💻 Microsoft (MSFT) – Evening Star Pattern

In this case, the Evening Star pattern developed at the top of a bullish trend and reversed after its formation. The pattern consists of a bullish first candle, a Doji with

the second candle, and a long bearish third candle. Similar to the previous example, gaps are noticeable between the candles, and trend lines are not involved. The second candle is higher than both the first and third candles, validating the pattern and confirming the trend reversal.

Pros and Cons of Morning Star and Evening Star Patterns

👍 Advantages

• Higher accuracy compared to other reversal patterns due to the presence of three candles for confirmation
• Applicable across various time periods and markets
• Can help traders identify safe entry and exit points

👎 Disadvantages

• Increased complexity due to the involvement of multiple candles
• May require additional confirmation from volume or other technical indicators
• Patterns may not always result in immediate reversals, leading to potential false signals

Conclusion

The Morning Star and Evening Star patterns offer traders a powerful tool for predicting trend reversals. By understanding the significance of the second candle in each pattern and taking volume into account, traders can increase their chances of successfully navigating market trends on eToro. Despite their complexity, these patterns provide higher accuracy compared to other reversal patterns, making them a valuable addition to any trader’s toolkit.

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Author & Expert Trader - Financial Analyst :

My name is Bart Bregman and I am a full-time professional trader with nine years of experience. I specialize in shorter-term trading using technical analysis, and I have extensive experience with Stocks, CFDs, Options, and Crypto trading. I believe that there is no such thing as a bad trade. I'm currently traveling the world as a digital nomad trader. You can follow my journey on Instagram at https://www.instagram.com/bart_bregman/