Shooting Star Pattern –
Shooting Star candle is a single bearish candlestick pattern which appears during the uptrend. It signals the reversal of trend but there is no assurance of that so better way to trade this kind of pattern is to use stop loss.
Shooting star candle and inverted hammer candle are similar and it is really confusing for some people to understand. So we will make it very simple to understand, This candle appears at the uptrend and inverted hammer candle appears at the downtrend. If you understand this then there is no confusion now.
Shooting star candle forms when opening, closing and low price of the candle is approximately same, the upper wick should be twice as that of the body and having very low or no lower wick. Now we will see what it means actually, this candle forms during the uptrend, it gives us message that the bulls pushed the price up after opening a candle but then bears took the charge and they pushed price down and at the end of the day price closed approximately near to the price opened. That is similar to the inverted hammer. Color of the candle doesn’t matter but red shows strong signal.
As we can see from the above chart after forming shooting star candle (shown in 1st blue circle) price started falling, we can enter in the trade when next candle breaks low of shooting star candle and we can place stop loss above the high of the shooting star candle and can set our target to the next support or according to risk and reward.
Also you can see 2nd blue circle this pattern didn’t work, there was resistance but still it didn’t, so stop loss helped us to minimize our loss.
After that 3rd blue circle this pattern worked.
Above chart shows the price started falling, after the shooting star pattern formed. So it shows importance of this pattern, It helps us to identify the reversal of trend for short term as well as long term.