Learn How To Trade the Shooting Star Candle Pattern

reversal candlestick

With the MACD confirmation and the shooting star pattern – a selling position should be made with a stop loss above the highest level of the shooting star candlestick. On the other hand, as it is the case with all candlestick patterns, a shooting star issues a signal, not a trading signal. For this reason, always verify the validity of a signal by checking other technical indicators. Unfortunately, some traders do not take that extra step in gauging the market context around a shooting star formation. This can lead to a higher rate of false signals, and lower overall profitability when using the pattern. Those that do take the time to understand the market environment in which the shooting star pattern should be traded, will be better rewarded for their efforts.


The Shooting Star is a candlestick pattern to help traders visually see where resistance and supply is located. As always, verify these signals by checking other candles and indicators, and look for confirmations before you enter a trade based on a single pattern. It’s not until we break above the 0.68 level that there could be any real strength in the Aussie. This would break through the 50-Day EMA and the cluster of trading from a couple of weeks ago. However, this level is likely to give a lot of headaches to buyers, so traders should look for signs of exhaustion to sell, just as we saw on Friday.


In this case, we will employ the nine period simple moving average as the mechanism for trailing the price action and issuing our buy exit signal. More specifically, when the price crosses above and closes above this nine period simple moving average line, we will exit the position completely. After this sluggish price action higher, we can clearly see that a shooting formation prints on the price chart. Notice that it meets all of the criteria for correctly labeling it as a shooting star formation. Secondly, the upper wick is very prominent, and the open and close are both at the lower end of the range. Confluence describes the event of multiple indicators pointing in the same direction.

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The resistance level also allows one to try and sell the market at highs. The Shooting Star pattern is considered a bearish candlestick pattern as it occurs at the top of an uptrend and is typically followed by the price retreating lower. Once we have found such a market, then we would wait for a shooting star formation to form during one of the pullback legs.

Identifying the Shooting Star Pattern

At one point, the price action creates a new short-term high, but the bulls fail to force a close in the upper part of the candle. On the contrary, the price rotates lower and closes near the session’s open and low price levels, thus creating a shooting star. That is to say that the upper wick of this candle is very prominent in comparison to the lower wick. Additionally, the open and close of this formation occurs near the bottom of the range. And finally, the size of the body within the candle should be relatively small. If you examine the shooting star formation here, it’s quite evident that all of these characteristics have been met.

The price action moves higher again in the session, fails to create a new high, and reverses to close at the low of the session. In both cases, an occurrence of the shooting star at the top of an uptrend only generates a signal of an impending reversal and it shouldn’t be taken as a direct trading signal. Both the green and red versions are considered to be shooting stars although the bearish candle is more powerful given that its close is located at the mere bottom of the candle. Again similar to a hammer, the shadow, or wick, should be twice as long as the body itself.

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So essentially, we consider a shooting star pattern to be an upside rejection pattern. The implication of which is that the supply in the market is higher than the demand, thus, a continued price decline should ensue. The Hanging Man is a bearish reversal pattern that can also mark a top or strong resistance level. You can try your hand at spotting the shooting star pattern along with other technical indicators using the Metatrader 5 trading platform.

Learn How To Trade the Shooting Star Candle Pattern

We want the shooting star to either touch or penetrate the upper line of the bearish channel. This event would serve as our confirmation for the shooting star pullback set up. Another differentiation is the bullish hammer, which is exactly the opposite of a shooting star candlestick formation. The bullish hammer appears after a price correction or downtrend and indicates a trend reversal towards the upside. Additionally, there are some characteristics of a shooting star formation that, if they occur, make the signal of a possible market reversal to the downside stronger.

It has a very similar structure as the Gravestone Doji candlestick pattern, though the latest has no body, meaning the opening and closing price are the same. In this article, we are going to cover all the basics you need to know in order to start using and identifying the shooting star candlestick pattern in forex trading. The light blue line shown on the price chart is our nine period moving average line that serves as the exit signal. After a sharp drop from the shooting star candle, the price started to print a few consecutive green bars.

If the price ultimately continues to rise, the uptrend is still intact and traders should favor long positions over selling or shorting. The shooting star candle is most effective when it forms after a series of three or more consecutive rising candles with higher highs. It may also occur during a period of overall rising prices, even if a few recent candles were bearish. Given that there are more than 100 different candlestick patterns, it is no surprise that some of them look very similar. In this particular case, it is worth noting the difference between a shooting star and a hammer, an inverted hammer, and a gravestone Doji.

Here, the position of the bullish hammer candlestick formation is perfectly positioned, although the candlestick’s body is quite small. A 15-minute chart of GBP/USD in the forex market is shown below, illustrating an instance of the shooting star formation occurring and correctly presaging a turn to the downside. Therefore, it is essential to use stop loss orders to control losses should the reversal fail to hold, and the price continues moving up. Risk management is important to incorporate when using this candlestick pattern. This provides the trader with a ‘safety net’ should the market move negatively.

So now we have protected the position in case the trade begins to move against us. Fortunately for us, the price action started to move lower precipitously following the breakout signal. Our exit plan calls for monitoring the price action closely and waiting for a candle close above the nine period simple moving average line. It’s important to note that there is nothing magical about the nine period simple moving average line.

As you can see, in the GBP/https://g-markets.net/ 30-min chart below, the shooting star pattern appears after an uptrend and indicates a price reversal of the current trend. As with any other technical analysis candlestick patterns, you must know how to correctly identify the shooting star pattern in order to use it as part of your forex trading strategy. In a short time frame, the price action creates two candles with long wicks that extend higher, which signals that the bulls are losing their momentum. Finally, a clean shooting star candlestick is formed and then followed by a long bearish candle that confirms the reversal.

Once we have identified these forex shooting star, then we will prepare for a short trade. This time we will look at trading the shooting star candlestick when it appears within the corrective phase of a larger down trending market. On the price chart above you can see that the price action was moving higher. Notice how the market is making higher and higher swing lows, and making higher and higher swing highs as well. At some point during the uptrend, the momentum behind price action began to wane.

How to Trade the Shooting Star Candle

The emergence of a bearish candlestick the following day affirms that momentum had changed from bullish to bearish on bears overpowering the bulls. If looking at the daily chart, the formation of a bearish candlestick after a shooting star pattern confirms price reversal. In this case, traders can look to enter short positions to profit as prices correct from the previous highs to new lows. A shooting star candlestick is a unique charting pattern that comes at the end of an uptrend and indicates a potential trend top area followed by a trend reversal. This bearish reversal candlestick has a long upper shadow, little lower shadow, and a small body.


In general, the longer the wick the stronger the reversal, since the long wick signals the inability of the bulls to secure a high close. The formation is bearish because the price tried to rise significantly during the day, but then the sellers took over and pushed the price back down toward the open. As you can see, this creates an overall bearish structure because prices were unable to sustain their higher trade. The content on this website is provided for informational purposes only and isn’t intended to constitute professional financial advice. Commodity.com is not liable for any damages arising out of the use of its contents.

bearish channel

When the market found the area of resistance, the highs of the day, bears began to push prices lower, ending the day near the opening price. 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. During the previous candles, the bulls have been in control, pushing the prices higher and into an established uptrend.

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