One of the key points when opening a trade is the time of entry. When you master this skill, you have increased the odds of winning the transaction. And you will be able to identify the entry signal known as a “reversal candlestick pattern” which we will now introduce. In this article, I will show you what an Evening Star candlestick pattern is. Characteristics, meanings, and how to use Evening Star candle in the most effective way.
Most detailed video about Evening Star pattern
What is Evening Star candlestick pattern?
The Evening Star pattern is a strong reversal signal. When it appears at the top of an uptrend, it signals a reverse from up to down.
Characteristics of the Evening Star pattern
Evening Star is a pattern made of 3 candles instead of one or two candles like many Japanese candle patterns you have ever known. It consists of:
– First candlestick: is a bullish candlestick with a large body.
– Second candlestick: is a small body (bullish or bearish) candlestick such as Doji or Spinning Top.
– Third candlestick: is a bearish candlestick that closes below 50% of the first candle.
A variant Evening Star pattern often offers high accuracy. They differ only in the second candle which is a medium-sized candlestick (Gravestone or Shooting Star). The color of the candle does not matter.
Evening Star pattern meaning
When the Evening Star pattern appears, the market usually reverses from rising to falling. The first long bullish candlestick reinforces the ongoing uptrend. After that, the second candle with a small body indicates a clear weakened momentum. Finally, a long bearish candlestick ends the ongoing uptrend, forming a downtrend.
Combining the candlesticks of an Evening Star pattern, we get a Shooting Star candlestick pattern. But with the structure of 3 candles with long candle period time, the Evening Star pattern is more trusted by traders.
There are other common variations of the Evening Star candlestick pattern. The difference from the standard pattern is mainly on the second candle.
When the second candlestick has a long upper tail, it shows the Bear’s rejection in price rising. This is a variant of the Evening Star pattern that has the same precision as the standard one.
In case, the second candlestick stays apart with a gap. It is also known as the Abandoned Baby candlestick pattern which rarely appears but its accuracy is high.
How to trade Binary Option with Evening Star pattern
Evening Star is a pattern for early warning of an upcoming reversal from up to down. For safe entry points, you can combine it with other technical analysis indicators.
Combined with resistance
Conditions: A 5-minute Japanese candlestick chart. The expiration time of 5 minutes.
Open a DOWN option: The Evening Star candlestick pattern appears at the resistance zone.
Explanation: When prices enter a resistance zone, they often refuse to rise further. If the Evening Star candlestick pattern appears at the resistance, it is a very safe entry signal.
Combined with Stochastic indicator
Conditions: A 5-minute Japanese candlestick chart. The expiration time of 15 minutes.
Open a DOWN option: The Evening Star pattern appears at the overbought line of the Stochastic indicator.
Explanation: When the Evening Star candlestick pattern appears, it signals a trend reversal. At the same time, the Stochastic indicator points down and the blue line crosses the red line from above.
Notes when using the Evening Star pattern in Binary Option trading
– The Evening Star candlestick pattern has high accuracy when appearing at the end of an uptrend.
– Combine it with basic indicators to get high-accuracy entry points.
– Do not use reversal candlestick patterns in a sideways market.
– Do not trade binary options with a short time frame. The expiration time must be 5 minutes or more.
When using the Evening Star reversal candlestick pattern, pay attention to the second candle. Because right there, you will feel the weakening of the bullish momentum. This is also the time to focus your observations.
Finally, once confirming the Evening Star candlestick pattern, open an order safely and reasonably. Let’s test this candlestick pattern in options trading on a demo account first before using it in your real account.