These two candle formations have made a lot of traders profitable since the beginning of chart trading. Morning and evening stars are able to immediately provide a lot of information regarding the situation in the market. This reversal formation can immediately tell us:
Price development was interfered by strong support/resistance.
Tight trading range was created in lower timeframes (second narrow candle).
Breakout of the range was against the direction of previous price development, resulting in price bouncing from S/R (last signal candle).
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However, this simple forex formation has one secret to it. You can't get greedy. Therefore, honest 50/50 approach is used.
Forex strategy rules
Buy:
We identify Morning star formation.
Bearish candle followed by extremely narrow (almost like doji) candle. Third candle of the formation is bullish, closing above the open of first bearish candle.
We enter long on 3. Candle close.
Placing stop loss 1 pip below the low of the morning star formation.
Take profit: distance between entry and stop loss will be used as profit target.
Sell:
We identify Evening star formation.
Bullish candle followed by extremely narrow (almost like doji) candle. Third candle of the formation is bearish, closing below the open of first bullish candle.
We enter short on 3. Candle close.
Placing stop loss 1 pip above the high of the evening star formation.
Take profit: distance between entry and stop loss will be applied as profit target.
