The Morning Star Pattern in Forex Trading

Introduction: What is the Morning Star Pattern?

In candlestick trading, the Morning star pattern is a bullish reversal pattern. It consists of three candlesticks, the first one being a large red candle, the second one being a small green candle, and the third one being another sizeable green candle. The pattern can be considered complete when the formation's third candlestick closes at least above the midpoint of the first two candles.

The Morning Star Pattern is a pattern of three events that precede the main event. The Morning Star Pattern is a pattern that has three events that happen before the main event. These events are usually an introduction, an escalation and a conclusion. The morning star pattern is also known as the "three-act structure." The three-act structure is a central component of storytelling. It is broken down into three parts: the beginning, the middle and the end. This type of structure in trading can come in handy for analyzing any financial product or asset.  

Because this is a reversal pattern, traders look for the formation of a morning star and then use additional indicators to confirm that a reversal is taking place. As we have mentioned in other articles about candlestick trading, most candlesticks-based trading strategies require further validation to establish a bias.

How to Trade the Morning Star Pattern

The Morning Star pattern is a bullish reversal pattern traders can spot in all time frames in a financial chart. It consists of three candlesticks: the first candle is Long and bearish, the second is short and can be either bullish or bearish, and the third one is a long and bullish candle that closes above the second one. 

The pattern predicts that a downtrend will reverse into an uptrend. Traders could buy when they see this pattern on a chart. Of course, as we have repeatedly said on xenofinance, all candlestick patterns are more effective when combined with other indicators.

The image above shows an example of how to trade with the Morning Star candlestick pattern. First, we ensure we confirm there was a previous downtrend after spotting the formation. Many traders use the Relative Strength Index to predict when an asset is oversold, which can apply as a reversal confirmation. Once our confirmation is complete, we can take a long trade with the stop loss below the Morning Star formation.

Conclusion: The Morning Star Pattern is a Powerful Forex Trading Strategy

The pattern begins with a long red candle, followed by a small green candle. This is followed by a long white candle, which closes above the previous open. The pattern is considered valid if it forms within an established downtrend. The first and last candlesticks are of almost equal length. The Morning Star Pattern is a powerful forex trading strategy that can be used to make profits in the foreign exchange market.