If you are studying Japanese candle patterns, you cannot miss the Shooting Star. This is one of the four very famous single candles next to the Hammer, Inverted Hammer and the Hanging Man. Candlestick Starts for bearish signals to appear, appearing on many charts of prices. Therefore, you need to understand the characteristics and usage of them to be able to make an accurate decision when caught. This article will help you with that
What is Shooting Star?
Shooting Star is a single candlestick that appears in an upward direction, with a very long upward tail while a short real body. This is a candle to signal a trend reversal from up to down. This candlestick pattern is also known as the Pin Bar in the Price Action school.
The shape of the Shooting Star candle and the Inverted Hammer candle are exactly the same but they are different in the context of appearance. The same candle, if it appears in a downtrend will be called the Inverted Hammer, giving bullish signal; If it appears in an uptrend, it will be called Shooting Star, giving bearish signal.
Features of Shooting Star
Here are the identifying characteristics of the Shooting Star candle model:
- Small candle body
- The upper shadow must be long, at least double the body of the candle, the lower shadow is short or may not be.
- Appears at the top of the uptrend
- It could be a rising candle or a bearish candle, the color of the candle does not matter
Shooting Star signals a bearish reversal, this pattern is usually not used individually but needs to combine at least one more candle later. Besides, if the previous uptrend is strong, the strength of the model will be increased.
Psychological evolution of Shooting Star model
The key point in this model is the long tail pointing upwards in the direction of the trend. It showed that initially the buyers tried to raise the price very high but the sellers did not accept that, they reacted fiercely to push the price down to the opening. The market has rejected the above price and put many traders in the trap, they will become scared and want to exit the order later.
Kangaroos often use their tails to aid in jumping. The way the market reverses after the Shooting Star candle appears is the same as that image, so many traders also call the upper shadow of the Star Shooting Candlestick the Kangaroo tail.
Actual example of Shooting Star model
Below is an example of a Shooting Star model on the graph. They may be white, may be black, but they all appear at the top of the uptrend and push the long tail upwards.
Instruction to trade with the Shooting Star model
As mentioned earlier, the Shooting Star model is not a very strong reversal. According to statistics, the rate of one Shooting Star candle creating a long downtrend is not much in the market then. Saying so does not mean that this candle is worthless, but vice versa.
The bottom line is we shouldn't act in a hurry here. Instead, wait for a confirmation of the pattern: wait for the next candle to close below the bottom of the Shooting Star. Besides, you can use other indicators or analyze price action to check whether the upward trend has weakened. Below we give a trading example for Shooting Star candles on Apple stock chart, M1 frame
Ways to enter commands
The sell order will be entered as soon as the model is confirmed. In the above example, after an uptrend, two consecutive Shooting Star candles were created and were unable to surpass the previous peak. An opportunity to review the transaction has emerged.
With the first Shooting Star candle, we haven't been able to enter it yet because there is no confirmation. The price did not drop but continued to create another Candlestick. In this second session, the market then dropped and broke the bottom of the Shooting Star candle, giving an entry signal at the next candle.
How to set a stop loss (stop loss) and take profit (take profit)
A stop is placed at the top of the Shooting Star candle. The simple take-profit point can be calculated by taking the stop-loss distance multiplied by 2 or 3 times. That is, if the stop loss is 20 pips, the profit taking should be greater than 40 pips.
Another way is to place profit taking at the strong support areas below.
Shooting Star is an important single candlestick pattern and is very popular in Japanese candle patterns. The advantage of this candle pattern is easy to identify, appearing much on the graph. However, you should remember that we should not trade with a single candle, observe the other factors and wait for the confirmation of the market before entering the order as we have instructed on the article. . Good luck
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Author: Tin Nguyen
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