Shooting Star Candlestick Pattern Meaning, Chart, How To Trade?
All ranks are out of 103 candlestick patterns with the top shooting star candlestick performer ranking 1. « Best » means the highest rated of the four combinations of bull/bear market, up/down breakouts. When the RSI rises above 70, then the market is essentially in overbought mode and a bearish trend reversal is expected. When the RSI falls below 30, then the market is in an oversold condition and a bullish trend reversal is likely to happen. There are variations but the core shooting star themes of long shadows and potential trend reversals after advances remain constant. On the way down, the price creates one correction during the bearish move.
A shooting star candlestick is inherently a bearish sign, so no, there are no bullish shooting star patterns. However, the shooting star’s cousin, the inverted hammer, is a bullish market reversal which looks identical to the shooting star pattern. The key difference is that a shooting star forms at the highs, while the inverted hammer forms at the lows of a price move. The primary disadvantage of shooting star candlesticks is that they are prone to producing false signals. Sometimes, the patterns following the shooting star do not reflect the trend reversal that the shooting star implied. It is to overcome the false signal limitation that most traders prefer to wait for the pattern that follows a shooting star before making trading decisions.
- Thus, traders need to look for other indicators that confirm the results of this candlestick pattern.
- The color of the candlestick doesn’t have an impact on its indication because the bearish reversal indication is derived from the long upper wick with a small body and little to no lower wick.
- An inverted umbrella line is a candlestick that has a short real body that is located at the lower end of the price range, very little or no lower shadow, and a long upper shadow.
- If you continue that way, you will have more losing trades than winning ones.
- You can draw horizontal lines to identify the borders of the range or you can use the Bollinger Bands, which can give a rough estimate of the boundaries of the range.
- For the pattern to be a shooting star, it has to occur at the top of an upswing, which is what differentiates it from its look-alike, the inverted hammer.
Alternatives To The Shooting Star Pattern
The Shooting Star pattern is a major bearish trend reversal pattern that warn of a possible transition to a downtrend. Once the formation of the Shooting Star pattern has completed the trader would look to close any long positions and initiate short positions. A trader with open long positions would thus look to close their long position on the open of the next candlestick. Traders will also look to initiate short positions on at the same point, i.e., on the open of the next candlestick. You’ll get a hanging man candle if you flip a shooting star on its head. The hanging man has a short real body with a long lower wick and little to no upper wick, whereas a shooting star has a short body with a long upper shadow and little to no lower shadow.
Shooting Star Candlestick vs Hammer Candlestick vs Inverted Hammer Candlestick
Interpreting the Shooting Star gives traders valuable insights into moments when optimism begins to fade, providing clues about a potential trend shift. If you’re interested in refining your ability to spot such patterns, The Chart Guys offer resources that dive deeper into understanding and trading with candlestick patterns like the Shooting Star. WT Trading Mentoring helps traders gain a practical understanding of market structure, candlestick formations, and the mindset needed to execute trades calmly. The program emphasizes real chart scenarios, avoiding unnecessary complexity or unrealistic promises.
- A trader analyses the Meta stock chart on the TickTrader platform by FXOpen and spots a shooting star stock pattern after an extended uptrend.
- Trading this candle involves looking for confirmation of the reversal, such as a bearish candle following the pattern.
- The shooting star and evening star both suggest a bearish reversal after an upward price move, while the morning star indicates a potential bullish reversal following a decline.
- However, if the price stays flat or pushes above the shooting star’s high, you may want to hold off.
- The shooting star is a bearish reversal pattern, and its presence on a chart suggests that the buyers are losing control, and the sellers may soon take over.
- The share price increased significantly during the trading session, peaking at $180.
Clearly, if you want to trade market reversals, a strong momentum move is always preferred—especially when you’re doing Shooting Star trading. However, if the price makes a false breakout, this group of traders is trapped, and their stops will trigger strong selling pressure. Investing in Equity Shares,Derivatives, Mutual Funds, or other instruments carry inherent risks, including potential loss of capital. Elearnmarkets (Kredent InfoEdge Pvt. Ltd.) does not provide any guarantee or assurance of returns on any investments.
When you trade price rejection, you want to be the faster train moving at 200km/h — that’s where you’re dominant. So if you want to ride massive trends, then you need to use a trailing stop loss. If you want to ride a trend, then you must not have a fixed target profit. So, if you are long, then you can consider taking profits at Resistance, Swing highs, Fibonacci Extension, etc. That’s why you must have a stop loss in place so you can minimize the damage done to your trading account. But remember, the Shooting Star is only one variation of bearish price rejection.
With the close near the low, it should not take muchfor price to breakout downward (a close below the bottom of the candlestick) and yet it does so only 59% of the time. Pictured in the daily chart at A is an example of a shooting star that appears as part of a retrace in a downward price trend. Unfortunately, thedownward trend is not a long one, so this is not a perfect example. Examining the performance statistics confirms that the shooting star acts as a reversal 59% of thetime. Thus, although price reverses more often than not, do not depend on that happening.