Sometimes a chart or a candlestick pattern may provide a decent entry signal if it is located at a certain level. A pin bar is one of the most reliable and famous candlestick patterns, and when traders see it on the chart, they expect the price to change its direction soon.
Shooting star trading strategy
2022-05-24 • Updated
A shooting star pattern is really popular among traders because of its simplicity and effectiveness. Elsewhere, this pattern has a significant advantage – it occurs on the charts quite often, so it won’t take too much time to find it. In this article, we will discuss what the shooting star pattern is, how to recognize it, and how you can use it in your trading. Let’s get started!
What is a shooting star?
- A shooting star is a candlestick with a long upper shadow and a little lower shadow.
- As a rule, it has a small body, which should be close to the low of the session.
- A shooting star only appears after an upward price movement. It is important! The pattern occurs after a swing higher in price action and not after a swing lower.
- The color doesn’t matter!
Look at the picture below – it is the shooting star!
What does a shooting star signal?
A candlestick roughly represents the tug-of-war between buyers and sellers. If a candlestick grows up, it means that there are more buyers or bulls on the market. Therefore, the price rises. On the flip side, if a candlestick goes down, there are more sellers or bears on the market. As a result, the price moves downward.
The long upper tail of a shooting star shows that bulls (buyers) were trying to push the price higher, but by the end of the session more bears (sellers) appeared, and they pulled the price lower. In other words, higher prices were rejected, so the price moved down. That’s why the price is likely to go down in the next session as well.
How to trade a shooting star?
Great! You’ve learned what a shooting star is and how to identify it. Now the time to know how to use it! There is a simple trading strategy. First of all, you open the chart and try to find a shooting star. Once you’ve noticed the formation of the shooting star, you should wait for the next candlestick to move below the low of the shooting star you’ve just found. You need to do that to make sure the candlestick pattern confirms itself. The perfect market entry will be exactly at the time when this confirmation happens. You can use a sell stop entry to do this automatically.
Let’s try this strategy on the EUR/USD chart.
- After the price moves higher it forms a shooting star.
- The next candlestick goes below the low of the shooting star, confirming the pattern.
- This low is the perfect entry to the market!
- It’s better to put stop loss just above the long upper shadow of the shooting star to minimize possible risks.
- After that, the price moves down, as expected.
- The profit target should be at the support level (for example, the recent lows).
Awesome! You’ve just leveled up your trading skills! Try it in Demo Account.
Among hundreds of different indicators and technical tools for traders, the relative strength index (RSI) is one of the most popular due to its simplicity and, at the same time, its power in various trading cases. In this article, we want to tell you about another powerful tool similar to RSI but with some cool tweaks.
There are a lot of valuable strategies that require the knowledge of candlestick patterns and oscillators. However, not of them are profitable. When you start trading with them, you can face situations when the strategy is not moving your way.
How to withdraw the money you earned with FBS?
The procedure is very straightforward. Go to the Withdrawal page on the website or the Finances section of the FBS Personal Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.
How to open an FBS account?
Click the ‘Open account’ button on our website and proceed to the Personal Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading.
How to start trading?
If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.
How to activate Level Up Bonus?
Open Level Up Bonus account in web or mobile version of FBS Personal Area and get up to $140 free to your account.