Introduction to Shooting Star Pattern
In this module, we are going to discuss the Shooting Star pattern, which gives a very strong signal of a trend reversal (probably to downtrend). We'll show you what this looks like, its characteristics, and valid conditions for this candle.
In addition, we'll look at the psychology behind the Shooting Star pattern and discuss predictions for the future.
The first thing we want to discuss with you is what a Shooting Star pattern is.
During an uptrend, a candle with a small real body at the bottom, little to no lower shadow, and a long upper shadow is called a shooting star pattern.
Shooting Star Pattern Anatomy
Characteristics of a Shooting Star Pattern
| Feature | Character |
|---|---|
| Formation | The pattern is made up of just one candle. |
| Color | The Shooting Star candle can be green or red. |
| Real Body Position | The small real body is near the bottom of the candle’s range. |
| Shadow | There is little to no lower shadow. |
| Shadow Proportion | The upper shadow is at least twice the height of the real body. |
| Range | The range is wide, showing a lot of price movement during the session. |
| Volatility | Volatility is high, especially seen in the long upper shadow. |
| Trend | The Shooting Star pattern is seen in an uptrend, hinting at a possible trend reversal. |
| Momentum | Momentum shifts from buying to selling, indicating a potential bearish reversal. |
| Symmetry | The candle is asymmetrical with a long upper shadow and a small real body. |
| Volume | Volume may be high, but it's not always needed to confirm this pattern. |
Blueprint of a Shooting Star Pattern on chart
A Shooting Star Pattern occurs during an uptrend and indicates the possibility of a counter-trend, meaning a reversal to a downtrend.
Limitations of the Shooting Star Pattern
- False Signal: In volatile markets, the Shooting Star pattern can result in incorrect trade entries, especially during strong uptrends.
- Dependence on Confirmation: This pattern requires additional indicators or price action for confirmation to avoid false signals.
- Movement: The Shooting Star primarily indicates short-term price reversals rather than sustained long-term trends.
- Market View: Its effectiveness is influenced by the overall market structure and conditions.
- Limited Use in Strong Trends: Less reliable in strong bullish trends, where reversals may not occur.
- Asset Variation: The success rate can vary depending on the financial instrument being traded.
- Point of View: Traders may interpret the Shooting Star pattern differently, leading to varied strategies.
- Volume Factor: Low trading volume can reduce the pattern's validity, making volume an important consideration.
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