Shooting Star Chart Pattern Explained

The hammer candlestick is a one-bar bullish reversal pattern that’s the opposite of its shooting sister. The difference between the hammer and the shooting star is that the hammer is a short-bodied candle with a long lower wick and little to no upper shadow. In contrast, the shooting star is a short-bodied candle with a large upper shadow and little to no lower shadow. Let’s practice identifying the shooting star candlestick pattern. We see a single green candle; remember, candle color doesn’t matter, with a long wick, short body, and almost no lower shadow in an uptrend. With the shooting star pattern identified, traditional traders enter short at a break of the low, setting a stop loss above the shooting star high.

• This candlestick pattern forms at the end of an ongoing uptrend and indicates a bearish price trend reversal.
• Shooting star candlestick patterns tell traders about upcoming bearish trends in the market.
• One thing that seems clear from the research is that most day traders lose money .

It shows that buyers tried to push the rally higher, only to be firmly rejected by sellers. The shooting star and the hanging man are both bearish reversal patterns, but they highlight weakness in different ways. Both are most meaningful after an advance, especially when they appear near prior highs or established resistance. In those spots, a gravestone doji often signals hesitation, while a shooting star leans more clearly bearish, pointing to active rejection of higher prices.

Additionally, the stochastic oscillator’s %K line has turned down from overbought and a bearish crossover appears imminent—clear evidence in favor of a reversal. These patterns offer a much stronger signal because they confirm the reversal across two periods, showcasing a complete momentum shift. Understanding this battle helps you judge the strength of any signal. Engulfing, hammer, and morning/evening star patterns tend to be reliable, especially with volume and trend confirmation. Watch how the same pattern behaves differently in trending versus ranging markets.

What Is the Meaning of a Shooting Star Pattern?

• The hanging man is a one-bar bullish continuation candlestick pattern.
• In my experience, I have not had much luck trading them on time frames lower than the 15 Minute chart.
• As one can observe, a green shooting star had formed after tapping the 4H 50 period exponential moving average.
• At the end of the uptrend, a shooting star candlestick pattern with a long upper wick is visible.
• When similar emotions repeat under similar circumstances, the same price structures tend to form.

Inside the flag, you’ll see several spinning tops and doji candlesticks. Greed usually turns to fear…that is where the panic selling starts. Traders can also see a large bearish candlestick form on the chart, letting traders know the bears are in control for now. This is why trading with an experienced group of traders can be advantageous. Shooting star patterns indicate that the price has peaked and a reversal is coming.

By using shooting star candlesticks, investors are made aware of upcoming bearish trend reversals and they can use this knowledge to plan their investment and trading strategies accordingly. The best time to trade using the shooting star candlestick pattern is when the shooting star is formed following two or three days of consecutive highs. The shooting star formed after two or three days of highs as the security price is close to or at the highest price point, within that particular time frame.

Tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. Tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors.

Historically this pattern leads to near-term volatility that data-driven traders capture using mean reversion strategies. The frequency and performance of this pattern make it one of the best crypto candlestick patterns. The shooting star candlestick pattern is a one-bar bearish reversal Japanese candlestick pattern that historically leads to near-term volatility. We can now piece all this information together to see how to trade the shooting star candlestick pattern. Firstly, we need to identify a shooting star which follows an uptrend.

In a downtrend, it indicates a buying pressure, followed by a selling pressure that was not strong enough to drive the market price down. The inverse hammer suggests that buyers will soon have control of the market. A hammer shows that although there were selling pressures during the day, ultimately a strong buying pressure drove the price back up.

What sets them apart is the number of candles involved and how the reversal signal unfolds. The shooting star is a single-candle formation, offering a more immediate visual cue of rejection from higher prices. Yes, despite being a commonly used bearish reversal signal, the shooting star is not always reliable on its own. Several market factors can weaken or completely invalidate the setup, leading to false signals.

You can also combine the shooting star signal with other divergence strategies such as hidden divergence. If you’re extra conservative and patient, you can even wait for divergence to occur on multiple indicators at once, which is a really strong reversal signal. The idea behind divergence trading is that the lower highs on the MACD or another indicator could be an early sign that momentum is leaving the trend.

The Hanging Man Candlestick Pattern

Tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero. Investing in Equity Shares,Derivatives, Mutual Funds, or other instruments carry inherent risks, including potential loss of capital. Elearnmarkets (Kredent InfoEdge Pvt. Ltd.) does not provide any guarantee or assurance of returns on any investments.

Once the candlestick is formed with a confirmation candle, you may enter a short trade When trading the shooting star candlestick, always set your stop loss above the candlestick’s upper shadow with a couple of extra points to accommodate the spread. This protects your trade from being wicked out too quickly, as the shooting star candle is prone to form a few times in a row. Below, we share what the shooting star candlestick pattern is, how it works, and how to trade it effectively.

How May Traders Use a Shooting Star Candle?

Understanding these may help traders use the pattern within their strategies. Let’s compare the shooting star with other patterns with which it is often confused. The first step to finding resistance with a shooting star pattern is to observe where the wick has formed, and then… look left for any confluences!

Trading with Candlestick Patterns: Risk Management Strategy

The simplicity of the shooting star candlestick pattern is what makes it so easily accessible to new beginner traders. It is the lack of complexity that makes shooting stars a fairly reliable signal of bearish trend reversals. The shooting star candlestick is considered one of the most reliable candlestick patterns.

What Is a Shooting Star Pattern?

Now that we can identify this one-bar pattern, let’s learn the best shooting star trading strategies. We see the shooting star pattern on the Apple (AAPL) daily chart on November 22rd, 2021. The next session results in a bearish candle, confirming the downward movement and providing a potential entry signal. Now we have identified a shooting star and found additional evidence of a potential reversal by way of identifying divergence between price and the MFI indicator. In the following section, we’ll look at an example how to trade the shooting star pattern with the Money Flow Index in more detail. It’s more reliable when paired with high volume, confirmation candles, and additional bearish indicators like RSI or MACD crossovers.

Can a shooting star appear in a downtrend?

Some people try to trade stocks with line charts … they don’t last very long. Before you even think about becoming profitable, you’ll need to build a solid foundation. That’s what I help my students do every day — scanning the market, outlining trading plans, and answering any questions that come up. The lower shadow of a Shooting Star is usually small or non-existent.

It’s the shooting star patterned mirrored, and signals a bullish direction instead of a bearish direction as an upcoming direction. After forming a pivot high at ¥131.26, the price retraces briefly, then makes another run at the pivot high level. It’s at this point that a shooting star candlestick shooting star candlestick is formed, confirming bearish pressure to be present at the pivot highs. From here, you can already take a short trade, with a stop loss placed above the wick high. In such an environment, traders can look for the formation of shooting star candlesticks on rallies during a downtrend.