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What is a shooting star candlestick and how do you trade it?

Saqib Iqbal

Dec 16, 2021 17:18

Candlesticks supply plenty of insight into how market prices may behave. These patterns might signify entry and exit points for your trade. Discover one of the most significant candlesticks in trading-- the shooting star.

What is a shooting star candlestick pattern?

A shooting star candlestick pattern is a chart formation that takes place when a possession's market price is pushed up rather considerably, however then turned down and closed near the open price. This creates a long upper wick, a small lower wick and a small body.

 

The upper wick should take up a minimum of half of the length of the candlestick for it to be considered a shooting star. And, it should appear at the top of an uptrend. As a result, the shooting star candlestick pattern is frequently thought to be a possible signal of bearish reversal. This indicates an uptrend might not continue (rates might fall).

 

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Traders ought to take care not to puzzle the shooting star pattern with the inverted hammer candlestick-- as both have a longer upper wick and small body. Nevertheless, the inverted hammer signals bullish rather than bearish turnaround, and it is typically observed at the bottom of a downtrend.

Shooting star pattern example

Let's say you're following the Barclays share price, which opens the trading day at $339.60. The share rate begins going down, reaching $334.30, however then some good news within the company causes the share price to increase rapidly, reaching a high of $379.60. It closes at $342.30. These motions produce a shooting star candlestick, as imagined listed below.


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Advantages of the shooting star pattern in technical analysis

One of the primary benefits of the shooting star pattern in technical analysis is that it is a basic formation to determine. Even more, it is reasonably trusted in recognizing a bearish turnaround-- specifically if it appears near a resistance level.

 

The shooting star candlestick need to never be viewed in isolation. Prior to acting on the development, verify the signal utilizing technical indications. If you think that a shooting star at the top of an uptrend means possible reversal, you can check the bearish predisposition utilizing Fibonacci retracement. This indicator can determine the degree to which a market will move versus its existing trend.

How to trade when you see the shooting star pattern

There are a few actions you must follow if you want to trade when you see the shooting star pattern. Bear in mind that the shooting star might indicate unfavorable turnaround-- simply put, market value might go down. If you want to take advantage of falling prices, you can do so via derivatives such as CFDs or spread bets.

 

Follow these actions to go short when you see the shooting star candlestick:

  • Open a Top1 Markets trading account or log in to your existing account

  • Try to find the asset you wish to sell the search bar

  • Enter your position size

  • Select 'sell' in the deal ticket and confirm the trade

 

To practise trades before devoting to a live trading account, you can experiment with the Top1 Markets demo account. You'll get ₤ 10,000 in virtual funds to sell a risk-free environment.

Shooting star candlestick pattern summed up

A shooting star candlestick pattern takes place when a property's market price is pushed up quite substantially, however then turned down and closed near the open rate. It could be a possible signal of bearish turnaround, indicating an uptrend might not continue.

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