Shooting Star Pattern- The King of Candlestick Patterns
Shooting Star Pattern is well known for finding the reversals in the trading market. This shooting star pattern appears at the end of upward trend. It also indicates the change in trend. In this article, we will discuss all major things of the shooting star pattern and why traders need to have knowledge of it.
Main Parts of the Article:
1- What is the Shooting Star Pattern?
2-How to find this pattern on Charts?
3-Why is Shooting Star Pattern so important for traders?
4- How does a Shooting Star provide us a signal of trend reversal?
5-What are the disadvantages of the Shooting Star Pattern?
6-How you can confirm a Shooting Star Pattern?
8-What is the minor difference between the Shooting Star and Inverted Hammer?
10- How we can use the Shooting Star Pattern with Moving Averages like 200 EMA?
12- How to get a full grip on Shooting Star Pattern with practice?
What is the Shooting Star Pattern?
The shooting star pattern is very famous among traders to find the reversals. This pattern has a wick from the upper side and it contains a very small body. This pattern is quite helpful in improving your trading plan.
How to find the Shooting Star Pattern on Charts?
It is very easy to find the shooting star pattern on your charts. All you need to find the candle that is closed with a small body. Moreover, the upper shadow should be two times more than the length of the body. This type of candlestick pattern normally appears after a bundle of green candles. It indicates that sellers are gaining control in the market and buyers are losing their strength. In other ways, we can say that traders with buy positions are taking their profits.
Why this Pattern so important for traders?
If you are a trader and you love to trade reversals then shooting star pattern is for you. It allows traders to enter and exit from their trading at the right times and can make wise decisions. Shooting star pattern is very easy to understand for beginner-level traders and they can easily identify it on charts.
How does a Shooting Star provide us with a signal of trend reversal?
As we all know the trading market is a battle between the buyers and sellers so this type of pattern appears when buyers are getting weak and we can consider it as a sign of trend reversal. When the buyers takes the price in the upward direction then it creates a long upper shadow. On the other hand, when sellers get full control of the market they take the market down and then we can see a very small body of the candle.
This creates a shift between buyers and sellers and it provides us a potential trend reversal. Traders plan their long and short positions according to it.
What are the disadvantages of this pattern?
There is nothing 100% in the trading market so this famous candlestick pattern also has disadvantages. Especially, when we face a ranging /slow market conditions then it can provide us with wrong signals. If you just rely on this candlestick pattern alone then it’s wrong and risky.
It is always good to use the this pattern in combination with other indicators and technical analysis. By using it with other confirmations you can easily reduce the number of false signals in your trading.
How you can confirm a Shooting Star Pattern?
The first way to confirm a shooting star is to wait for the close of the next candle. For example, If you are trading any chart and you see a this pattern then you should not enter into a sell trade. It is better to wait for the next candle to close bearish and it breaks the low of the shooting star candle. This is the kind of signal that sellers have gained control of the market.
We can also use strong indicators like MACD, STOCHASTIC, and RSI to show us the signal from the overbought and oversold levels. The multiple confirmations can simply give a boost to our trading profits.
What is the minor difference between the Shooting Star and Inverted Hammer?
Some patterns mix up with the shooting star pattern and it’s very important for us to know the major one. Most traders are confused between the inverted hammer and shooting star pattern because both of them have small bodies and upper shadows.
There is a slight difference between the both patterns. We should always remember the shooting star only appears in the upward trend and it provides us a Sell signal. On the other hand Inverter hammer appears In the downward trend and it provides us with a BUY Signal. They look like same but if you keep this difference in your mind then you can avoid risky mistakes.
How we can use it with Moving Averages?
This is one of the great ideas to trade the shooting star with moving averages. For example, we can choose any period moving average and in the upward trend price action will be above the moving average. Later on when we see a shooting star then we can take a second confirmation from the moving average.
If we see that price action is now closed below the moving average and we have a shooting star at the top then we can confirm it is a very good sign of trend reversal. If you want to trade high-quality MA then go for a 200 period exponential moving average.
How to get a full grip on Shooting Star Pattern with practice?
It takes a little bit of time for beginner traders to practice with shooting star patterns. Beginner traders should find this pattern in the historical data available of charting platforms like Trading View. They should understand and practice it before they start trading on the real accounts.
When you keep on trading with same approach then it becomes very easy for a trader to identify their reversals in future and this thing only comes with practice.
Conclusion:
From this article, we can say that trading this pattern is very good for traders. They can easily develop their trading approach by using this strategy and can increase their winning numbers. Traders should always try this pattern with other technical indicators and use the best confirmations with it.
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