Forex trading with Evening star candles: Concepts, uses and benefits -

Forex trading with Evening star candles: Concepts, uses and benefits

Author: Michael view: 9 Update: 21/11/2023 Downloads: 0

Forex trading is one of the popular forms of financial investment today. With high liquidity and quick profitability, Forex trading attracts many investors around the world. However, to be successful in Forex trading, investors need to have the necessary knowledge and skills. In this article, we will learn about one of the effective ways to trade Forex – using Evening star candlesticks.

Forex trading concept with Evening star candlestick

Forex trading with Evening star candles Concepts, uses and benefits

Evening star candlestick is a Japanese candlestick pattern, often used in Forex trading to forecast downtrends. This pattern includes 3 candles, formed as follows:

  • The first candle: Is a bullish candle, with a long body and long upper shadow.
  • The second candle: Is a small candle, with a short body and long shadow or no shadow.
  • The third candle: Is a bearish candle, with a long body and long lower shadow.

The Evening star candlestick pattern often appears at the end of an uptrend, signaling a trend reversal. When this pattern appears, Forex traders will often execute short trades to take advantage of the new bearish trend.

The accuracy of the Evening star candlestick pattern in Forex trading

The Evening star candlestick pattern is considered one of the most powerful reversal patterns in Forex trading. This can be proven through statistics on the success rate of this model. According to a study by FXCM, the success rate of the Evening star candlestick pattern is about 60%, meaning 6 out of 10 transactions using this model are profitable.

This shows the high accuracy of the Evening star candlestick pattern in predicting downtrends in the Forex market. However, to achieve the highest success rate, traders need to apply this model correctly.

Factors to keep in mind when trading Forex with Evening star candlesticks

To use the Evening star candlestick pattern in Forex trading effectively, traders need to pay attention to the following factors:

  • Location of the pattern: The Evening star candlestick pattern often appears at the end of an uptrend. Therefore, to accurately determine the location of the pattern, traders need to monitor the chart and determine the end of the uptrend.
  • Size of the candles: For the Evening star candlestick pattern to be highly accurate, traders need to pay attention to the size of the candles in the model. The first candle must have a long body and long upper shadow, the second candle must have a short body and long shadow or no shadow, the third candle must have a long body and long lower shadow.
  • Determine the entry point: The entry point is usually placed right below the body of the third candle, to take advantage of the new downtrend.

How to use Evening star candlesticks in Forex trading

Forex trading with Evening star candles Concepts, uses and benefits

To use the Evening star candlestick pattern in Forex trading, traders need to accurately determine the position of the pattern on the chart. This pattern often appears at the end of an uptrend, after a bullish candle with a long body.

Once the pattern is located, traders can execute short trades following these steps:

  1. Determine the entry point: The entry point is usually placed right below the body of the third candle.
  2. Set stop loss: To protect investments from risk, traders need to set stop loss at a safe level, for example 10 pips above the entry price.
  3. Set take profit: To achieve the desired profit, traders need to set take profit at the appropriate level, for example 20 pips below the entry price.

In addition, traders can also use other technical indicators to determine entry points and set stop loss/take profit. For example, use a moving average or MACD indicator to identify the main trend and better entry points.

Benefits of using Evening star candlesticks in Forex trading

Forex trading with Evening star candles Concepts, uses and benefits

Using the Evening star candlestick pattern in Forex trading brings many benefits to traders, including:

  • Easy to recognize: The Evening star candlestick pattern has a clear and recognizable structure on the chart, helping traders easily apply it to their trading strategy.
  • High accuracy: As mentioned above, the Evening star candlestick pattern has a high success rate, helping traders achieve stable profits in Forex trading.
  • Flexible trading time: The Evening star candlestick pattern can be applied on different time frames, from short-term to long-term, helping traders to customize trading time to suit their schedule and needs. your investment goals.

Common mistakes when trading Forex with Evening star candlesticks

Forex trading with Evening star candles Concepts, uses and benefits

Although the Evening star candlestick pattern is highly accurate, there are also common mistakes when using this model in Forex trading. Those mistakes include:

  • Not determining the correct position of the pattern: The most important thing when using the Evening star candlestick pattern is to determine the exact position of the pattern on the chart. Without correct positioning, traders may miss trading opportunities or place wrong orders.
  • Not paying attention to the size of the candles: The size of the candles in the Evening star candlestick pattern plays an important role in determining the accuracy of the model. If traders do not pay attention to this size, they may place the wrong order or miss a trading opportunity.
  • Do not use other technical indicators: Although the Evening star candlestick pattern is highly accurate, to increase the likelihood of success, traders need to use other technical indicators to determine entry points. order and set stop loss/take profit.

Forex trading strategies with Evening star candles

There are many ways to use the Evening star candlestick pattern in Forex trading. Here are some popular strategies applied by traders:

Strategy 1: Entry point as soon as the pattern appears

This is the simplest strategy and also the most common way to use the Evening star candlestick pattern. When the pattern appears, traders will place a sell order just below the body of the third candle and set stop loss at a safe level.

Strategy 2: Combine with other technical indicators

As mentioned above, to increase the accuracy of the Evening star candlestick pattern, traders can combine it with other technical indicators such as moving averages or MACD indicators. When these indicators give a buy signal, traders can use the Evening star candlestick pattern to confirm the signal and place a sell order.

Strategy 3: Wait for the recovery after the pattern appears

This is a strategy suitable for experienced traders who want to optimize profits. Instead of placing a sell order as soon as the pattern appears, traders will wait for the price to recover after the pattern appears. If the price continues to fall after that, traders will place a sell order with a lower stop loss and a higher take profit.

When is the appropriate time to use the Evening star candlestick in Forex trading?

The Evening star candlestick pattern can be applied on different time frames, however, to achieve high accuracy, traders should use this model on larger time frames, from 1 hour or more. go up. This helps minimize spurious signals and increase model accuracy.

In addition, traders should also pay attention to trading time. The Evening star candlestick pattern often appears at the end of an uptrend, so to increase the likelihood of success, traders should use this pattern when the market is trending down.

Notes when applying the Evening star candlestick pattern in Forex trading

To apply the Evening star candlestick pattern effectively in Forex trading, traders need to note the following points:

  • Determine the exact position of the pattern on the chart.
  • Note the size of the candles in the pattern.
  • Use other technical indicators to increase the accuracy of the model.
  • Choose the right time and time frame to use the model.
  • Set stop loss and take profit at a level that is safe and suitable for your trading strategy.

Conclude

The Evening star candlestick pattern is one of the popular and highly accurate reversal candlestick patterns in Forex trading. However, to apply this model effectively, traders need to pay attention to the location and size of the candles, use other technical indicators and choose the right time to trade. In addition, paying attention to fundamental factors and market psychology is also important when using the Evening star candlestick pattern in Forex trading.

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