Индикатор Форекс Evening Star

Description: This is an indicator based on morning star and evening star pattern recognition, a known technical analysis pattern. I've built on top of the original script shared by @RomanLosev and extended it into a more refined trading strategy called Caves by a trader known only as Farid. The cave long and short indicators represent buy and sell signals based on the 20 EMA trendline.

Morning Star candlestick pattern

The Morning Star candlestick pattern is a reversal pattern in technical analysis. The pattern has three candles. It forms at the bottom of a downtrend. The first candle is any long and bearish candle. The second candle is a small and indecisive candlestick. The third candle is any long and bullish candle. “Bullish” means the stock price closes above the open price. “Bearish” means the stock price closes below the open price.

During a downtrend, high pessimism causes heavy selling. The pattern’s first candle forms. It’s long and bearish. The indecision between the buyers and sellers forms the second candle. It’s a small candlestick—or a Doji. The expectation of positive stock news in the market forms the third candle. It’s long and bullish. When the volume and stock price increases, it suggests a change in trend.

Evening Star candlestick pattern

The Evening Star candlestick pattern is also a reversal pattern. The pattern has three candles. It forms at the top of an uptrend. The first candle is any long and bullish candle. The second candle is a small and indecisive candlestick. The third candle is any long and bearish candle.

During an uptrend, high optimism causes heavy buying. The first candle forms. It’s long and bullish. The indecision between the buyers and sellers forms the second candle. It’s a small candlestick—or a Doji. The expectation of negative stock news in the market forms the third candle. It’s long and bearish. When the volume increases and the price decreases, it suggests a change in trend.

These patterns are used for trend identification. The Morning Star pattern is used as a buy signal. The Evening Star is used as a sell signal. It’s advisable to use a combination of patterns and indicators to determine your trading strategy.

Legend

-- ⬆️ is a U-shaped cave, morning star, visualizing a buy/long signal
-- ⬇️ is an A-shaped cave, evening star, visualizing a sell/short signal

Features

-- ability to change ema
-- style changes
-- emoji

The evening star is a classic bearish reversal pattern that traders look for as an early warning sign that a bullish trend is topping out.  It’s the counterpart to the morning star which is a bullish reversal pattern.

As a trading pattern, the preferred way to trade the evening star is when it appears in the bullish upward swings of a downward trending market.

To trade this pattern we look for some strength markers to determine the likelihood that sentiment is turning bearish.

How to spot an evening star pattern

This 3-candlestick pattern follows the characteristics of a faltering bullish trend. The first candle is a long bullish (white) candlestick &#; this often represents the end of an upward wave in the current trend.

Figure 1: Evening star patterns can signal the end of a bullish trend © forexop

This is followed by a much shorter middle candle that may have a long upper and lower shadow. The middle candlestick can be either black or white.

The important point to observe with the middle candle is that the body length should be much shorter than the first candle. Sometimes the body of the middle candle will be entirely flat in which case the pattern is known as an evening star doji.

The pattern completes with the third trigger candle. This should be a black (bearish) candlestick. To complete the Λ-shaped reversal pattern, the third candlestick should close at least ½ to ¾ of the distance below the top of the first candlestick.

On the daily chart, stock traders will often look for a gap between the close of the middle candle and the open of the black candle as an extra “bearish” confirmation. Although in round-the-clock markets such as forex this condition is usually relaxed.

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Strength of the pattern

Not all patterns are the same quality and for this reason it pays to look for additional information. Firstly, we look at the immediate uptrend.

Position: To be significant the evening star needs to appear as the highest point on the most recent uptrend. That is the middle candle should be the high point in the recent time period. If the market preceding the pattern was flat or if the pattern appears on a minor upward wave the signal is far more ambiguous.

The first candle: The other point to keep in mind is the overall size. The first candle should be large relative to those just before it. This means there was a wide price range that’s characteristic of a trend top. This suggests late entrants are pushing the market higher – often on thin volume – and into oversold territory.

The middle candle: The middle candle represents indecision. The market has pushed too high, too quickly, and there hasn’t been enough time to consolidate the gains. The narrow body suggests that supply/demand is evenly split and the upward momentum is temporarily exhausted.

The third candle: The pattern only completes when the third candlestick is fully formed. Most traders don’t act until this point because the risk is that a bearish candlestick can and often does turn bullish late on.

Additionally, the third candlestick might have a long upper shadow. This adds more weight to the signal because it suggest that the bulls were unsuccessful in pushing the market higher because selling pressure was greater than demand.

The bearish candle may sometimes completely engulf the preceding two candles. This is taken as a stronger bearish indication. In these cases the market will often retrace back upwards in the next few candles before falling again.

What does the evening star pattern really mean?

The evening star can appear in any bullish trend. But it’s more likely to appear in upward retracements of a bearish trend. These swing tops create good opportunities for selling the market. They can also create opportunities for closing out long positions at a better price.

Figure 2: Evening star in downtrend © forexop

As an example Figure 2 shows a typical evening star formation. This chart shows a medium term bearish downtrend on the daily chart (EUR/GBP). Though the pattern itself appears as an upward wave “tops out” and the market starts to fall again. This chart forms a double top pattern.

This second example shows an evening star doji. The formation is the same with the exception that the middle day is marked by a doji. This means that the price never made any headway.

Figure 3: Evening star with a doji middle © forexop

On the middle day, the price had a very significant range as marked by the long upper and lower shadow of the doji. This again is highly suggestive of the trend topping out. The third bearish candle nearly engulfs the previous two candles, and this again is indicative of some heavy selling pressure.

When to trade an evening star pattern

An evening star formation is an early warning sign that an upward trend could be running out of momentum. Like other candle patterns, it isn’t necessarily a sign of long-term market direction.

The pattern is mostly used for tactical swing trades – that is, entering short positions or closing/reducing long positions.

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What Is an Evening Star?

An evening star is a stock price chart pattern that's used by technical analysts to detect when a trend is about to reverse. It's a bearish candlestick pattern that consists of three candles: a large white candlestick, a small-bodied candle, and a red candle.

Evening star patterns are associated with the top of a price uptrend, signifying that the uptrend is nearing its end. The opposite of the evening star is the morning star pattern, which is viewed as a bullish indicator.

How an Evening Star Works

A candlestick pattern is a way of presenting certain information about a stock. It represents the open, high, low, and close price for the stock over a period of time.

Each candlestick consists of a candle and two wicks. The length of the candle is a function of the range between the highest and lowest price during that trading day. A long candle indicates a large change in price and a short candle indicates a small change in price.

The evening star pattern is considered to be a very strong indicator of future price declines. Its pattern forms over three days:

1. The first day consists of a large white candle signifying a continued rise in prices.
2. The second day consists of a smaller candle that shows a more modest increase in price.
3. The third day shows a large red candle that opens at a price below the previous day and then closes near the middle of the first day.

Special Considerations

The evening star pattern is considered to be a reliable indication that a downward trend has begun but it can be difficult to discern amid the noise of stock-price data. Traders often use price oscillators and trendlines to help identify it reliably and to confirm whether an evening star pattern has in fact occurred.

The evening star pattern isn't the only bearish indicator despite its popularity among traders. Other bearish candlestick patterns include the dark cloud cover and the bearish engulfing. Traders have their own preferences regarding what patterns to watch for when they want to detect trend changes.

Example of an Evening Star Pattern

The following chart provides an example of the evening star pattern:

The three days depicted here begin with a long white candle indicating that prices have risen from significant buying pressure. The second day also shows a rise in prices but the extent of the increase is modest compared to the previous day. The third day shows a long red candle in which selling pressure has forced the price to around the midpoint of the first day.

These are the tell-tale signs that an evening star pattern has occurred. Technical analysts trading this security would consider selling or shorting the security in anticipation of an upcoming decline.

The Bottom Line

It's a good idea to employ various indicators to help you predict price movements but the evening star pattern can be a solid tool. It's particularly useful in identifying downward trends but it can admittedly be a bit difficult to pin down. Options like trendlines and oscillators can help and don't overlook the value of a broker's advice and assistance.

Candlestick charts offer valuable information to a trader that is visually easier to interpret than a bar chart or line chart, for example. Technical analysts closely watch candlesticks for well-known patterns that tend to repeat in all markets and timeframes.

As a novice trader, it is important to educate yourself as much as possible if you wish to become consistently profitable in trading. Understanding candlestick patterns and what they tend to forecast is an important part on your personal trading journey.

In this article, we will explore one such important candlestick pattern: the evening star forex pattern. We’ll discuss what it means when you see it on your chart and how to trade it.

What is the evening star forex pattern?

Image for illustration purposes only

The evening star pattern consists of three candlesticks, unlike a singular candlestick pattern like the doji or hammer, for example. The three candlesticks are typically found at important market highs, and the pattern forms when you see a green candlestick moving higher, followed by a second candlestick with a much smaller body (which could be green or red).

After the second candlestick with the smaller body closes, the third candlestick of an evening star forex pattern immediately reverses lower to form a red candlestick.

What does the evening star forex pattern mean?

Image for illustration purposes only

An evening star forex pattern is considered a rare pattern, but when it does occur, there is a strong possibility that a bullish trend might be nearing an end with a strong reversal lower to potentially follow. The chart example above shows how an uptrend ended abruptly directly after the formation of a forex evening star pattern.

This pattern is therefore considered to be a bearish reversal pattern.

During the three-candlestick pattern, buyers are in control during the first green candle on the left. On the second candle, however, indecision steps in and neither the buyers nor the sellers gained the upper hand by the time that candlestick closes. Then, on the third candlestick, sellers almost immediately take control, driving the market lower – often with a wide-ranging red body that is accompanied by an increase in volume.

How to trade the evening star forex pattern

The three-candlestick formation of an evening star pattern is relatively easy to identify, but there are a few additional things to look out for to determine which forex evening star patterns offer the best trading opportunities.

Image for illustration purposes only

We previously mentioned that the third reversal candlestick of the evening star pattern often shows an increase in volume. Using the same chart example as before, we added the volume indicator to illustrate this behaviour.

An increase in volume during the third candlestick is considered a tell-tale sign that you are dealing with a high-probability evening star reversal. If the volume also peaks above the prior two candlesticks of the same pattern, then that is an even better sign that generally confirms the sellers are taking control.

Image for illustration purposes only

Once an evening star forex pattern has formed and volume supports the idea that selling pressure is increasing, then a sell order can be placed a few pips below the third red candlestick of the pattern, with a stop loss a few pips above the candlestick with the small body.

With this easy strategy, a target can be placed at a level that would allow you to profit twice as much than what you are willing to initially risk on any particular trade.

Image for illustration purposes only

Our second entry example shows another evening star forex pattern that also appeared at the end of a bullish trend. With this example, however, the third red candlestick did not have a large red body like our previous example. That being said, when it comes to trading the financial markets, not all the patterns you will learn about will always have the “picture-perfect” look.

With this example, the volume did increase on the third candlestick, and the amount of volume was larger than the previous two candlesticks of the same pattern. These occurrences were enough to classify this evening star pattern as valid although the entire pattern does not look exactly like a picture-perfect example.

Trader’s tip: It is important sometimes to be a bit flexible with your interpretation of what an evening star pattern “should” look like. Reading what the price action is telling you and the story that volume is revealing to you is often more important than trying to find perfect patterns.

There is one final thing that can help you spot the highest probability reversals whenever an evening star forex pattern shows up on your chart. Note how the third red reversal candlestick’s range broke below the low of the first green candle of the same pattern (black dotted horizontal line on the chart above).

The same thing happened with our first trade example, and apart from the increase in volume condition we have been talking about before, this was another good indication that a reversal was imminent.

Image for illustration purposes only

With all the right conditions in place, a sell order could have been placed a few pips below the third red reversal candlestick, and a stop-loss could have been placed a few pips above the second candlestick with the small red body.

In this final example, a target was again placed at a level that offered double the reward versus the initial risk.

Conclusion

Although the evening star forex pattern is considered a rare candlestick pattern, the appearance of this formation almost always leads to some sort of a reversal, whether it’s a change in trend or just a counter-trend correction.

However, understanding that not all candlestick patterns provide the best setups all the time is also important, which is why the volume indicator can be used to help you spot the best evening star forex setups.

Hopefully, this article helped shed some light on this fascinating pattern and will motivate you further to study candlestick patterns in more detail.

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Evening Star Candlestick Patterns help traders identify ideal exit levels in the forex market by signalling a slowed upward momentum and strengthened downward momentum. This pattern occurs very frequently in charts, hence, they are easily identifiable by traders to place exit orders before the market reverses. In this article, we learn all about the Evening Star Candlestick Pattern and how you can trade them.

Understanding the Evening Star Candlestick Pattern

An Evening Star Candlestick Pattern is a technical indicator that consists of three candlesticks that help in identifying bearish market reversals. It appears at the top of an uptrend and provides traders with ideal exit price levels in the market. The Evening Star Pattern consists of three candlesticks

• A large bullish candlestick that signals a continuous rise in the currency pair prices
• A smaller bullish candlestick that signals a moderate increase in the currency pair prices
• A large bearish candlestick that opens below the previous day’s price level and signals a bearish market reversal

What is an Evening Doji Star Candlestick Pattern?

The Evening Doji Star Candlestick Pattern is different from the Evening Star Candlestick pattern in only one way. In a Doji Star Candlestick pattern, the second candlestick is not a small-bodied bullish candlestick but a gap candlestick in which the opening and closing price of the currency pair is almost the same. It also appears in an uptrend and reverses after the third bearish candlestick is formed, providing traders with ideal sell/short signals.

How to identify the Evening Star Candlestick Pattern for forex trading?

1. Identify a prior uptrend

A prior uptrend can be identified when the current currency pair prices are trading at a higher high and higher low level.

2. Identify the three candlesticks occurring consecutively

The Evening Star Candlestick pattern always consists of three consecutive candlesticks (two bullish and one bearish).

• The large bullish candlestick will appear as the first candlestick in the pattern, which will be a result of heavy buying pressures from the buyers due to a continued uptrend. Traders at this point will long their trades as no reversal is expected yet.
• The small bearish candlestick will be the first sign of the currency pair prices opening and closing near to each other, with the trading price range narrowing down. This will be the first sign of a weak uptrend as prices will only increase moderately. This is the first point of market indecision, which is only confirmed after the third candlestick appears.
• The large bearish candlestick is the first signal of heavy selling pressure that confirms the downtrend reversal in the market. At this point, more and more traders place a sell order to exit the trade.

3. Identify the continued price action

The last step in identifying an Evening Star Candlestick Pattern is the subsequent price action that occurs after the three candlesticks take place in the price chart. Once the prices reverse and traders place exit orders, lower lows and lower highs currency pair prices are observed in the market, signalling traders that from hereon, the market is going to witness a downtrend until there is another market reversal.

How to trade with an Evening Star Candlestick Pattern

Step 1: Set a chart time frame

Set an hourly or weekly chart to identify the three candlesticks in the pattern. This is because a long-term chart is a better depiction of the candlesticks and where the market is supposedly headed, providing you with ideal reversal signals.

Step 2: Analyse the open, close, high and low prices

Pick a particular section in the chart and analyse the currency pair’s open, close, high and low prices during the trading time. The Evening Star Candlestick Pattern can be recognised right where there are two bullish candlesticks, the first one being significantly larger than the second and one bearish candlestick, marking the reversal signal. Once you have studied the different prices properly, you will be in a better position to understand the market momentum.

Step 3: Use the RSI indicator

The Relative Strength Index combined with the Evening Star Candlestick Pattern, helps traders identify overbought levels in the market. These levels confirm traders about the reversal signal and place exit orders accordingly. Wait for the RSI to cross 70 and compare it with where the Evening Star Candlestick Pattern occurs. If they are both occurring simultaneously, the reversal signal is confirmed.

4. Restrict the time frame

Once the overbought area is identified along with the Evening Star Candlestick Pattern on a longer time frame, it is time to now focus on a shorter time frame. You can cut down the time frame to a 5-minute or minute chart as it is neither too slow nor too fast. Restricting the time frame to a shorter level will provide you with the exact price levels where you can place the exit or sell orders.

5. Place stop loss and take profit orders

A stop loss level is the price level at which your trades are automatically exited when the market turns against you. You can either place your stop-loss order right above your entry price or at RSI’s level 30 to limit losses. On the other hand, take profit orders can be placed right below the bearish candlestick or at the opening level of the candlestick that occurs as a downtrend begins.

6. Monitor and exit trades accordingly

After you have identified the Evening Star Candlestick Pattern, compared it with the RSI levels and placed the stop loss and take profit orders, it is time for you to sit back and monitor the price chart closely. Look for the uptrends and reversals to ensure that you exit trades on time.

Trade with the Evening Star Candlestick Pattern

It is important for traders to know when the market is going to potentially reverse as it helps them take important trading decisions accordingly. You can start trading with Blueberry Markets to enjoy a seamless trading experience and make the most out of the Evening Star Candlestick Pattern.

Understanding the Evening Star Forex Pattern: A Comprehensive Guide

When it comes to forex trading, it is essential to have a solid understanding of various chart patterns that can help predict market trends. One such pattern that traders often rely on is the Evening Star pattern. This pattern is a powerful indicator of a potential trend reversal, and traders who can effectively identify and interpret it can gain a significant advantage in their trading strategies. In this comprehensive guide, we will explore the Evening Star Forex pattern in detail, including its definition, formation, and how to effectively trade it.

What is the Evening Star Forex Pattern?

The Evening Star pattern is a bearish reversal pattern that occurs at the end of an uptrend. It consists of three candles and is characterized by a large bullish candle followed by a small-bodied candle (either bullish or bearish) and finally a large bearish candle. The pattern represents a shift in market sentiment from bullish to bearish, indicating that the uptrend may be coming to an end.

Formation of the Evening Star Forex Pattern

To understand the formation of the Evening Star pattern, let&#;s break it down step by step:

1. Step One: Bullish Candle

The pattern begins with a large bullish candle, indicating a strong buying pressure and an ongoing uptrend. This candle represents the continuation of the current trend.

2. Step Two: Indecision Candle

The second candle in the pattern is a small-bodied candle, often referred to as an indecision or spinning top candle. This candle indicates that the market is losing momentum, and the buyers and sellers are becoming more evenly matched.

3. Step Three: Bearish Candle

The final candle in the pattern is a large bearish candle that closes below the midpoint of the first bullish candle. This candle confirms the trend reversal and suggests that the bears have taken control of the market.

Trading the Evening Star Forex Pattern

Now that we understand the formation of the Evening Star pattern let&#;s discuss how to effectively trade it:

1. Confirmation: It is crucial to wait for confirmation before entering a trade based on the Evening Star pattern. Traders often look for the bearish candle to close below the midpoint of the first bullish candle to confirm the reversal.

2. Entry Point: Once the pattern is confirmed, traders can consider entering a short position at the open of the next candle after the Evening Star. This provides an opportunity to profit from the anticipated downtrend.

3. Stop Loss and Take Profit: To manage risk, it is important to set a stop-loss order above the high of the Evening Star pattern. This will protect against potential losses if the market turns against the anticipated reversal. Traders can consider setting their take-profit target based on key support levels or previous swing lows.

4. Additional Indicators: Traders may choose to use additional technical indicators to supplement their analysis of the Evening Star pattern. For example, they may look for overbought conditions on oscillators like the Relative Strength Index (RSI) or bearish divergences on the Moving Average Convergence Divergence (MACD) indicator.

Limitations and Considerations

While the Evening Star pattern can be a reliable indicator of a trend reversal, it is essential to consider certain limitations and factors that may impact its effectiveness:

1. Context: It is crucial to consider the broader market context and other technical indicators before making trading decisions based solely on the Evening Star pattern. Factors such as major news events, economic data releases, or overall market sentiment can influence the pattern&#;s reliability.

2. False Signals: Like any technical pattern, the Evening Star is not infallible and can occasionally produce false signals. Traders should always use proper risk management techniques and not rely solely on a single pattern for their trading decisions.

3. Timeframes: The effectiveness of the Evening Star pattern may vary across different timeframes. Traders should consider testing the pattern on various timeframes to determine its suitability for their trading strategy.

In conclusion, the Evening Star Forex pattern is a powerful tool for identifying potential trend reversals in the forex market. By understanding its formation and how to effectively trade it, traders can gain an edge in their trading strategies. However, it is important to consider the limitations and use proper risk management techniques when incorporating this pattern into a trading strategy.

Identifying and Avoiding False Signals in Forex Evening Star Patterns

Forex trading is an intricate and complex market that requires traders to analyze various indicators and patterns to make informed trading decisions. One such pattern that traders often look for is the Evening Star pattern. The Evening Star pattern is a bearish reversal pattern that occurs at the end of an uptrend, signaling a potential change in market direction. However, it is crucial for traders to be able to distinguish between true and false signals when identifying Evening Star patterns to avoid making wrong trading decisions. In this article, we will discuss the characteristics of a genuine Evening Star pattern and provide tips to avoid false signals.

The Evening Star pattern consists of three candles and is formed by a large bullish candle, followed by a small-bodied candle, and completed by a large bearish candle. The first candle in the pattern is a strong bullish candle that indicates the presence of buying pressure. However, the second candle is a small-bodied candle that indicates indecision in the market. This small-bodied candle can take various forms, such as a doji, spinning top, or a small bearish candle. Finally, the third candle is a large bearish candle that confirms the reversal, indicating that selling pressure has taken over.

To identify a true Evening Star pattern, traders should pay attention to the following characteristics:

1. Size of the candles: The first and third candles in the pattern should have significant size differences. The first candle should be much larger than the second candle, and the third candle should be larger than both the first and second candles. This size difference indicates a shift in market sentiment and increased selling pressure.

2. Gaps: It is preferable for there to be a gap between the first and second candles, as well as between the second and third candles. These gaps further reinforce the bearish sentiment and indicate a potential trend reversal.

3. Confirmation: Traders should look for additional confirmation before entering a trade based on the Evening Star pattern. This can be in the form of a break below a support level, a bearish candlestick pattern, or a bearish indicator divergence.

While the Evening Star pattern can be a reliable indicator of a trend reversal, it is important to be cautious of false signals. False signals can lead to losses and can be frustrating for traders. Here are a few tips to avoid false signals when identifying Evening Star patterns:

1. Consider the context: Before placing a trade based on the Evening Star pattern, it is essential to consider the overall market context. Is the pattern forming in a strong uptrend, or is it occurring in a sideways market? A pattern that occurs in a strong uptrend is more likely to be a true signal compared to one that forms in a sideways market.

2. Volume analysis: Volume can provide valuable insights into the strength of a pattern. Traders should look for an increase in volume during the formation of the Evening Star pattern, particularly during the third bearish candle. High volume confirms the presence of selling pressure and increases the reliability of the pattern.

3. Multiple time frame analysis: Analyzing the pattern across multiple time frames can help traders filter out false signals. If the Evening Star pattern is present on multiple time frames, it increases the likelihood of a true reversal.

4. Use additional indicators: Traders can combine the Evening Star pattern with other technical indicators to confirm the reversal. For example, using oscillators like the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD) can provide additional confirmation of a trend change.

In conclusion, the Evening Star pattern is a popular bearish reversal pattern that can provide valuable trading opportunities in the forex market. However, it is essential for traders to be able to distinguish between true and false signals to avoid making wrong trading decisions. By paying attention to the characteristics of a genuine Evening Star pattern and using additional analysis techniques, traders can increase their chances of accurately identifying and trading this pattern.