How to Trade Shooting Star Candlestick Pattern

Have you ever wanted a trading sign that glows like a bright star in the sky? Now you can have it! The “Shooting Star” pattern is a strong and exciting sign that can help you navigate the ups and downs of the stock market. It’s like a star that makes a big impression in the sky – it can make a big difference in your trading success! Let’s explore the world of “Shooting Stars” and see how they can help you succeed in trading.

An Overview of the Shooting Star Pattern

A Shooting Star candlestick, a bearish candlestick with a long upper shadow appears at the peak of the uptrend. It is a hammer candle upside down.

The distance between the peak price and the opening price is more than twice the diameter of the candle.

What does it look like?? ????

• The size of a Shooting Star’s small real body is the difference between a trading session’s opening and closing price. The real body of a Shooting Star is usually red or filled, indicating a bearish trading day.

• A Shooting Star has a long upper shadow that extends far beyond its small real body. The upper shadow represents an intraday high achieved during the trading session.

• Most of the time, the lower shadow of the Shooting Star is either very small or completely missing, extending only a few inches below the small body, or it doesn’t extend at all.

Also Read –> How to Trade Doji Candlestick Pattern

1. Upper Tail

• The Upper tail is also called the shadow. It is the line that appears above the candlestick body
• The Upper tail is at least twice or thrice the size of the candlestick body.

2. Lower Tail

• The bottom tail is the tail that extends below the body of the candle. The tail is either missing or too short.

3. Candlestick Body

• The Candlestick body shows the opening price and closing price of the stock. The candlestick is very small in a shooting star pattern showing that the opening price is very close to the closing price.

How to trade using Hammer candlestick pattern

1. Determine the Pattern:

• Begin by looking at your price chart (usually a daily chart or hourly chart). Look for a candlestick that fits the characteristics of a Shooting Star that are-:
  • Small Real Body 
  • Long Upper Shadow 
  • Short or No Lower Shadow

2. Confirmation:

• A single candle pattern, like the Shooting Star, isn’t always a good trading signal. It’s best to wait until the next candle or subsequent sessions to confirm the pattern. If the candlestick is a bearish one or the price drops further, you can confirm the Shooting Star.
• Consider where the hammer is drawn. After a long time of decline, the hammer comes out, signaling that sellers may be in danger of losing money.

3. Entry point: 

• If the price keeps falling after the shooting star pattern is confirmed, think about taking a short or a bearish position. Some traders jump in right after the shooting star candlestick bottoms.

4. Stop loss and Risk Management:

• To reduce the risk of loss, place stop-loss orders above the height of the shooting star candlestick.
• Find out how much risk you’re willing to take, how big of a position you want to have, and how much of a risk-risk you want to be in your trading strategy.

5. Monitor the Trade:

• Once you’ve entered the trade, keep a close eye on the price movement to see if it supports your hypothesis. If necessary, adjust the stop-loss and take-profit levels accordingly.

Conclusion

A shooting star candlestick pattern is a useful indicator of market behavior, but not a perfect one. It occurs when an asset’s price increases significantly but then closes near the open price. It can also be used as a sell signal by aggressive traders, but other indicators should be used to evaluate potential sell signals.

(Frequently Asked Question) FAQ