The evening star
The evening star is the final item on our list of candlestick patterns presented in this module.
The evening star is essentially a bearish counterpart of the morning star. It appears at the peak of an uptrend and manifests itself as a three-candle formation in three consecutive trading sessions, just like its positive counterpart.
The reasons to go short on an evening star are as follows:
The trade setup for an evening star is as follows:
Summarising the entry and exit for candlestick patterns
To finish this chapter, we have summarized the entry and stop loss for both long and short trades. We haven’t addressed targets yet, though, that will be discussed in the next chapter.
A risk-taker should enter the trade on the final day of pattern formation close to the closing price (3:20 PM). To qualify as a trade, ensure that the rules of the pattern are fulfilled.
The risk-averse trader will initiate a trade after they have identified a confirmation on a subsequent day. To open a long position, they seek a blue candle while aiming for a red one to set up short trades.
Generally, the more days in a pattern, the better it is to execute the trade on that day.
The stoploss for a long trade is the lowest low of the pattern, while the stoploss for a short trade is the highest high of it.
You might wonder if there are only 16 types of candlestick patterns.
No, not really. Although there are numerous candlestick patterns, a further explanation would be counterproductive to attaining our ultimate goal.
The objective is to comprehend and identify that candlesticks constitute a mode of analysing the markets. It is not necessary to be aware of all the patterns.
Once you learn the art of car driving, there is no difference in handling a Honda or Hyundai or Ford. Similarly, when training your mind to spot a candlestick pattern, the chart does not matter; bear in mind that mastering this skill requires rigorous learning and trading it correctly.
So, based on our discussion here, my suggestion to you is to be familiar with the patterns we went through – they are some of the most common and lucrative ones to trade with on the Indian markets. As you advance, begin creating trades based on the understanding of what motivates bulls and bears. This way might be the most effective way to learn candlesticks over time.