Forex Patterns – Shooting Star

The Shooting Star Pattern

The Shooting Star is formed when the open, low and close are in a very tight range, while the high has created a long upper shadow.  This candle forms when buying failed, and selling took over during the session that created the candle.

This single candle pattern is helpful to traders because it gives an indication of where supply overcomes demand.  This point could also be called “resistance.”  It’s great to be able to identify this candle, but trading it is another thing altogether.  I love price action trading.  But to trade a reversal candle like the shooting star you must actually be in an established trend.  Otherwise, there’s nothing to reverse.  I’ve coached dozens of traders.  Many of these traders try to trade every spiky candle that they see!  Let me help you out here.

I only trade a Shooting Star when it follows at least three bullish candles.  This is my rule, and I never deviate from it.  As a result, I have a high percentage of winning trades using this pattern.

Entry:  I place a Sell Stop order a few pips below the low of the shooting star.  There’s just no point in placing a market order on this pattern.  Doing so is too risky!  Remember that a single bank order could have caused this formation, and when the market returns to normal, buying will overcome selling again.  Accept the larger stop loss and place the stop order.

Stop loss orders go a few pips above the high of the Shooting Star.  It’s that simple.

Targets should be at least 1:1 to your stop loss size.  Look for areas of support, defining points of trendlines, etc.  If you’re not trading into clear space, don’t place the order.  It’s not worth the risk, and there are plenty of trading opportunities for the price action trader!