A shooting star is a fairly popular pattern among financial market traders. It is easily recognizable and reliable enough. But it does not appear as often as many would like. In addition, a shooting star is not very actively used on the price charts of currency pairs. This is because the model assumes a gap between the star and other candles. Although this condition is not necessary, it significantly enhances the signal. We will discuss how the shooting star looks, how it is formed, and how to enter the market with the shooting star candlestick strategy.
Table of Contents
Shooting Star Pattern Shape
Like most reversal candlestick figures, a shooting star is characterized by the shape and location of only one Japanese candlestick. The requirements for its form are the following:
- The top candle wick should be at least twice as large as the candle body;
- The lower shadow should be absent or not more than 10% of the body of the candle;
- The body of the candle should be small about the upper shadow. The color of the candle does not matter.
Why Does the Shooting Star Figure Appear?
Very often, a shooting star rolls back from a significant level of support-resistance. This is evidenced by the presence of a long candlewick. However, this is not always the case. A shooting star may mean that the uptrend has only lost its strength. The impulse may come after some flat. It is also worth considering that the Shooting Star is not the strongest figure in the Price Action system.
Signal Amplification of the Shooting Star Model
You need to consider the following:
- The longer the upper shadow of the falling star and the smaller its body, the stronger the pattern;
- The absence of the lower shadow of the shooting star enhances the signal;
- A bearish candle of a shooting star is considered stronger than a bullish candle;
- The presence of a gap between the shooting star and the previous candle strengthens the pattern.
- If a shooting star appeared near the resistance level but did not pierce it with its body, then this strengthens the model.
When to Enter a Deal
The formation of a Shooting Star candlestick strategy does not guarantee anything. You must wait for confirmation. As always, this confirmation is the next candle formed after the pattern. And it should be bearish with a sufficiently large body. If there is a gap in the pattern, the bearish candle should block it. At the close of such a candle, it is necessary to enter into a deal. And if the body of a shooting star breaks through the resistance level, then you should not risk entering a deal.
Conclusion
A shooting star is a simple candlestick figure. Compliance with the conditions for its formation will help you to navigate the financial market on time and benefit from it.