Good morning! If you get out of bed in time (figuratively speaking) to catch one of these, you might be loaded. Let us focus on spotting out the “Bullish Morning Star Pattern”. Do you smell the coffee?
Forex trading presents multiple challenges. Challenges from “risking the correct percentage” to “managing a losing trade” can weigh on traders’ minds. One of the most difficult undertakings in Forex is to spot a price reversal. The Morning Star Pattern is a bullish forex reversal signal, this signal will usually occur at the bottom of a bearish trend in the market.
A Bullish Morning Star Pattern needs three Daily Bars: a major bearish bar, a reversal bar, and the bullish follow-through. This pattern is comprised of candlesticks which are a direct reflection of price action. That gives us confidence in using this pattern to analyze the market direction.
There are three critical bars in this equation. Let’s study these.
Major Bearish Bar
The first part of a Bullish Morning Star is day one’s Major Bearish Bar. This is applies where there is already an established downtrend. The bearish bar here will usually be hitting a new low.
The second day continues as bearish but closes around the place it opened (a Doji bar). This suggests a loss of bearish momentum. Your second day bar can actually be bearish or bullish. Red or blue. It is your Reversal Bar. It is the bar that begins the indication of change in the market’s direction. It’s like a hinge on a door, the door was closed but now the door is swinging open and here comes the bulls!
Bullish Follow Through
The Bullish follow through can be referred to as the Bullish Hammer. This is a “must-have” for the Bullish Morning Star. This bullish charge can, many times eliminate the loss seen on day one. The higher day three’s price moves up, the stronger the reversal signal is for the morning star pattern.
The Traditional Morning Star
The Morning Star is a pattern used in the stock market as well as other markets. In these markets, gaps are much more common than the Forex market. As a matter of fact, the traditional Morning Star requires a gap between the first and second day and a gap between day two and three makes it all the better.
After your bullish follow through candle, you may want to give the market time to establish the new trend. Maybe you want it to give you a couple more days to confirm the start of the new bullish trend. That is perfectly fine and completely up to your preference.
Let the knowledge of this Bullish Morning Star Pattern be another tool on your tool belt, as you conquer the markets!
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