Trading the Bullish Morning Star explained by professional Forex trading experts the “Trading the Bullish Morning Star” FX trading team.
Trading the Bullish Morning Star
A bullishmorning star pattern is a candle pattern established at the end of an extended downtrend. The pattern itself is pictured above,and it should be noted that the bullish morning star is comprised of three different candles. The first candle should depict a continuation of the established down trend. The second candle will show the slowing of bearish momentum. Price will make one final attempt at lower lows here, with the candle closing near its open price. Dojis and hammer candles are often found in this position.
The third candle in the bullish morning star pattern is the actual reversal signal. An extended blue candle should be seen in this position beginning a new swing in bullish momentum. Ideally this should be a bullish engulfing candle with its high extend well above the high of the previouscandle. This strong surge in price depicts fresh buying pressure on the pair with bearish traders exiting the market. The greater the advance of this secondary candle declines, the stronger the reversal signal is considered.
Uses in Trading
Traders often select to trade a breakout strategy in reversing markets. In a breakout scenario the high of the first candle of the pattern can be used as an area of resistance. Entry orders to buy can be set at this point as the pair begins to trade to higher highs. Also it is not uncommon to see traders use this analysis in conjuncture with an oscillator. Market orders can be placed in the direction of the new trend when indicators such as RSI show momentum returning from oversold levels. Regardless of the method chosen, traders should consider placing a stop order under the second candle low. In the event that a reversal fails and a lower low is made traders will want to exit their buy positions.
Trading the Bullish Morning Star Conclusion
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