Online Share Trading

Understanding Morning star pattern

Morning start is a term that you may not associate with technical trading. It is actually a popular candlestick pattern which indicates market trend reversal during a downtrend.

In the 1990s, candlestick patterns became very popular in western trading. Steve Nison, a western trader, introduced candlestick charts in 1991. It is now a common technique for technical trading.

It may be difficult for new traders to grasp a candlestick pattern if they are not seasoned traders who regularly deal with graphs and charts. Don't worry! We can help you understand a morning star pattern, and plan trades around it.

Although it might seem complicated at first, it is actually quite easy. A morning star pattern is made up of three candlesticks. Analysts interpret it as a bullish sign. It is a sign that a trend will rise after a very downward trend. The morning star pattern of a candle in the charts is a sign that a price trend has reversed. Traders then look for other indicators to confirm this.

You can see that the pattern's first section shows a strong bearish downtrend. The second day's downward gap is much smaller and the price is not moved lower than on day 1. At this point, the downward trend appears to be exhausted. Day 3 starts with an upward bullish tendency that leads to the trend reversal. Although the upward gap may not be as large as the one on day 1, it ultimately leads to the neutralization of losses.

Understanding the morning start pattern requires more information. A small gap on day two can be bullish, bearish, or neutral. A neutral gap is called a morning Doji Star, which is a variant of the morning star and represents indecision in market conditions. A bullish gap is a sign of a trend reversal. Day 3 is the most important and indicates true development.

Naturally, there will be a question about what Doji's morning star is. The candlestick family also includes Doji start. It is visible when the market seems indecisive.

The middle candlestick with no obvious wicks will be smaller if the price action is flat on day 2.

A doji morningstar candle design with a thick middle candle shows indecision better than a morningstar without a thick centre candle. A doji formed after a down candle can lead to an aggressive volume spike and consequently, traders will identify the formation as a morning star by a long upward candle.

What can you do with the morning star?

Morning star stock patterns can be used to indicate a trend change from downwards to upwards. However, they should be combined with other technical indicators. Volume, for instance, is an important indicator. The pattern should see volume increasing over the course of it, with day 3 showing the highest volume. The pattern will be confirmed if there is high volume and an uptrend. After the formation has been completed for 3 days or more, traders can open the next candle to ride the uptrend. To observe price action and ensure that stock prices are rising, conservative traders wait to enter. You could be in worse shape if you delay your entry in volatile markets. Both you and I know there are no guarantees in this market. A positive risk-to reward ratio should be maintained.

Here's a warning. Trading can be risky if you rely on only visual patterns. If the morning star stock pattern is supported by volume and other technical indicators such as a support level, it should be considered.

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