This article takes an in-depth look at the Morning Star candlestick pattern to educate how to master trading strategies on the Binomo platform. It also covers recognizing patterns to know the ideal time to trade.
What is the Morning Star candlestick pattern?
The Morning Star is one of the best-known candlestick patterns on Binomo for the lowest point of the downtrend. It is a visual pattern consisting of three candlesticks interpreted as bullish signs. The Morning Star forms following a downward trend, indicating the start of an upward climb. It is a sign of a reversal in the previous price trend. Traders watch for the formation of the Morning Star and then seek confirmation that a reversal is indeed occurring using additional indicators.
Preparations
When preparing to use the Morning Star candlestick pattern on Binomo, remember that the expiration time is 15 minutes or more. Additionally, prepare the 5-minute Japanese candlestick chart. The assets included are AUD/USD, EUR/USD, and USD/JPY.
3 Candles
The Morning Star candlestick pattern is easily recognizable on Binomo’s chart since it consists of three candles. Visually, the pattern consists of three candlesticks:
- A tall red candlestick shows that the price is falling abruptly.
- A smaller red or green candlestick with a short body and long wicks – it’s a Doji or Spinning Top candlestick. This is a support zone where prices stop falling and prepare for an uptrend.
- A third tall green candlestick must be at least ½ the length of the first candle then it indicates an uptrend.
The middle candle of the pattern captures a moment of market indecision where the bears begin to give way to bulls. The third candle confirms the reversal and can mark a new uptrend.
Note! The Morning Star is a three-candle pattern with the low point on the second candle. These three candles combine with a U-shape, indicating a shift in the trend direction.
The Formula for opening trades
Understanding the Morning Star pattern includes knowing the formula for opening trades. The formula is:
UP = Prices fall into the support zone + Morning Star candlestick pattern
The Morning Star candlestick pattern is created in the support zone when the price falls into the area with a bearish candle. Next, the Spinning Top candlestick on the Binomo chart shows the reaction of the price against the levels. Finally, the third candlestick signifies that traders are taking over, and the price will rise again.
Capital Management
When using this trading strategy on Binomo, always utilize the classic capital management method. It is because traders open trades with the same amount of funds.
The Morning Star is one of the best-known candlestick patterns among Binomo users as it is very accurate; therefore, it is often used in trading strategies. However, it does not often appear on the price chart, so the money management method is the most sensible way.
Entry points
There are two entry points when trading with the Morning Star candlestick pattern on Binomo:
- The first opening is after a strong bearish trend where the price touches the support zone and creates the candlestick pattern. At this point, traders can open UP trades with an expiration time of 30 minutes, after which it expires. The trade opens at 15:30 and then closes at 16:00.
- The second entry point is when the price rises above the resistance level. Afterward, it will bounce back away from the resistance level (the price is now in the support zone). At this point, traders can open UP trades with an expiration time of 25 minutes, after which it expires. The trade opens at 17:35 and closes at 18:00.
Note! The best entry point is at the opening of the next candle after the pattern is complete on the Binomo chart. For the conservative traders, it is better to enter after the closing of another candle to ensure the price action.
The Limitations
Trading solely on visual patterns is risky. The Morning Star should be confirmed by volume and another additional indicator. That’s how it works best. If this is not done, morning stars may form whenever a small candle appears in a downtrend, which may be confusing for traders.
Conclusion
Many Binomo traders use the Morning Star candlestick pattern in their trading strategies. It’s one of the basics and simple to learn. To test the candlestick pattern on Binomo, open a demo account. It allows you to test the pattern before trading in real time. You can also check out the Binomo education section for more information about indicators and trading strategies.
