You can also opt to use a 1-to-2 risk-to-reward ratio, where the reward is twice the amount you are risking. With our shooting star strategies, we found the 1 -to-1.5 risk-to-reward ratio works well as its breakeven rate is 40%. The essence of this strategy is the opening and closing of trades during intraday trading. Additionally, a crossover between a short-term and long-term moving average after a Shooting Star can be a powerful confirmation signal to enter a trade. Pairing the shooting star with Fibonacci retracement levels can give you a more precise entry and exit strategy. This strategy allows for capturing initial market moves while still ensuring some level of confirmation before fully committing to the trade.

Trading the Shooting Star Pattern with Technical Indicators

There are a ton of ways to build day trading careers… But all of them start with the basics. An opening gap following the appearance of a Shooting Star improves performance. Nathalie Okde is an SEO content writer with nearly two years of experience, specializing in educational finance and trading content. Nathalie combines analytical thinking with a passion for writing to make complex financial topics accessible and engaging for readers. This approach helps to maximize profits while maintaining a balanced risk exposure.

It’s the shooting star patterned mirrored, and signals a bullish direction instead of a bearish direction as an upcoming direction. There is sound logic in why traders perceive a red shooting star as more bearish than a green shooting star. First, the shooting star tells that the candlestick closed lower in price than where it started in price. Second, the long upper shadow indicates that the buyers attempted to push the price higher, but just did not have adequate buying power to sustain it – adding to the list of bearish signs. If a shooting star candle closes in red instead of green, it signifies stronger bearish pressure from sellers at the price zone. When combined with other factors, a red shooting star candlestick can provide a great sell signal for traders to enter.

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1. This level is a buffer if the price temporarily moves against your position before resuming the downward trend.
2. It’s not an everyday occurrence but appears often enough for traders to recognize and capitalize on its implications when it does appear.
3. It’s a potent bearish signal post an uptrend, but its effectiveness is amplified when corroborated by other technical factors.
4. Its appearance at resistance points signals that the upward price movement might be halted, providing traders an opportunity to exit long positions or initiate short trades.
5. It is particularly effective when it appears after a series of 2-3 consecutive rising candles with higher highs, indicating a strong upward trend.

The price chart above shows an increase in prices from the date May 14. The advance is seen to be rapid until shooting star candlestick the formation of the shooting star in early June. The shooting star is identified by its short body and long upper wick. The shooting star represents the advancing price after a high opening price followed by a decline in the price and a close that is near the opening price. In such a scenario, investors look out for the pattern that follows the shooting star pattern to confirm the bearish trend.

Also, it is very important to wait for the candlestick to be formed and not to sell a shooting star candlestick formation as long as the candlestick wasn’t closed yet. 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.

It is the lack of complexity that makes shooting stars a fairly reliable signal of bearish trend reversals. As the image shows, a shooting star occurs at the end of a bullish prior trend. In a shooting star candlestick pattern, the price advances considerably after the market opening.

The image below depicts the three things that are to be kept in mind while reading the shooting star candlestick pattern in technical analysis. Shooting star candlestick patterns are seen every time an uptrend reverses and turns bearish. A red shooting star indicates that the closing price of the security is below its opening price. The red shooting star candlestick is considered a more powerful indicator of an oncoming bearish trend as the closing price is at the very end of the candlestick.

What Is the Shooting Star Pattern? How to Trade Using Footprint Charts

The key difference is that a shooting star forms at the highs, while the inverted hammer forms at the lows of a price move. Candle’s real body is in the lower price range and has a long upper wick. A shooting star candlestick pattern occurs when an asset’s market price is pushed up quite significantly, but then rejected and closed near the open price. It could be a possible signal of bearish reversal, meaning an uptrend might not continue.

However, a small lower shadow, as seen in the chart above, is considered alright. The shooting star is a bearish pattern; hence the prior trend should be bullish. Candlestick patterns were originally designed for daily charts, as intraday charts can be noisy, making analysis more difficult and signals less reliable. Often described as a bearish reversal chart pattern, a Shooting Star has a long upper wick with a small to no lower wick on a small body. But the Shooting Star inverted hammer may only be considered reliable if they occur at the end of the uptrends.

1. Conversely, traders looking to get in a position could have entered a short on the close of the confirmation candle.
2. A red shooting star indicates that the closing price of the security is below its opening price.
3. The image above depicts what a shooting star looks like with its small real body and long upper shadow and wick.
4. Shooting star candlesticks are one of the most reliable candlestick patterns.
5. We must find the right entry point for a bearish Shooting Star candle.
6. Understanding chart patterns like the shooting star is essential for making informed decisions in trading.
7. It is important to acknowledge that one candle is often not meaningful enough to estimate the chances of a potential reversal.

You will also learn how to identify the shooting star pattern on the chart and apply it in trading in the financial markets. In the case of the shooting star, it signals a bearish reversal, suggesting that the upward momentum is losing strength and that the price may decline. Trading this candle involves looking for confirmation of the reversal, such as a bearish candle following the pattern. Traders often set stop-loss orders above the shooting star’s high and target profit levels near key support zones or previous lows. In contrast, the gravestone doji has no or a tiny real body, as the open and close prices are identical or nearly identical, with a long upper shadow and no lower shadow.