The Hidden Secret behind the Shooting Star Candlestick Pattern -Definition, Theory, Methodology, and Trading Setup.

In this blog, we are going to see about the Shooting Star Pattern, which is one of the Japanese candlestick charting techniques. We will deeply describe the Shooting Star Pattern formation, structure, theory, and techniques to analyze the pattern.

You will learn more about the Shooting Star Pattern in detail, which you could use in your trading technique. So read the full blog to get a better understanding of the pattern and techniques. Let’s dive into the concept.

Introduction of Shooting Star Pattern

The Shooting Star Pattern is a trend reversal pattern. It is formed on the High Trend in the chart. So the prior trend should be an uptrend. If this pattern is formed in the high trend, it has the possibility that this pattern will work 70% in the market.

It has a small real body and a long upper shadow. The body of the Shooting Star should be 3 times shorter than the upper shadow or the upper shadow must be 3 times longer than the Shooting Star body. That is, if the body is 1 time the size means the upper shadow must be 3 times longer than the size of the body. For the bearish candle, the open price will be greater than the close price.

Note: If the candle of this pattern is in a bullish candle, in some cases it is not considered as a Shooting Star pattern. The reason for this will be explained in detail in the upcoming topic.

Structure of Shooting Star Pattern

Now let’s see how the Shooting Star Pattern structure should be formed. We have different scenarios in which Shooting Star can be formed.

The above image shows the different scenarios in which Shooting Star can be formed. We will see in detail about these patterns in the upcoming topics.

Why these 2 bullish shooting star is wrong

These 2 bullish candles are not Shooting Star because there is buying pressure even though the seller pushed the market down. So this bullish shooting star has less probability that it will work in the market.

Why this bearish shooting star is wrong

This bearish candle is not a Shooting Star pattern because the presence of the seller is low. It has the possibility that the buyer can push the market up fighting with the seller as the volume of the seller is low. As you can see, the upper shadow is only 2 times greater than the real body. The upper shadow should be more than the 3 times of the real body.

Why this bullish candle is a shooting star

This bullish candle is considered a Shooting Star pattern, because as it has a bullish presence it also has a long upper shadow indicating that the seller pushed the market downside. So the market has a high probability that it will further move to the downside.

Why these 2 bearish candle is a shooting star

Now these two bearish Shooting Star patterns are correct. The left side shooting star is the perfect shooting star. It forms bearish with a long upper shadow which is 3 times greater than the size of the body. It means the sellers had pushed the market downward and it will further move down due to the selling pressure.

The right side bearish candle is also a shooting star, but it is not recommended to trade with this shooting star. Because due to the very long upper shadow and the bearish body, the market already reached more selling pressure. So it has only below 50% possibility that this bearish shooting star will work in the market.

You can also check the candle formation in the inner timeframe to get strong confirmation as given in the below image.

If the OLHC structure is formed, it has a high probability that the pattern will work in the market. Because the formation has more selling pressure, so the market has more possibility to move downwards.

If the OHLC structure is formed, it has only 50% probability that the pattern will work in the market. Because the formation is indicating buying pressure at the close of the market.

Note: We have to analyze the Shooting Star pattern in the higher timeframe. So you can check this pattern structure in the inner timeframe analysis. Shooting Star pattern will be formed in all the time frames. It is necessary to check the pattern in a higher timeframe to analyze more and it gives more accuracy to trade.

Theory of Shooting Star Pattern

Now we will be analyzing how the market will perform in this pattern. And how to analyze and take trade with this pattern.

As you see in the above image the Shooting Star formed in the high trend. Before the pattern formed there was an uptrend. You can see that the market has full control over the buyer and reached the high price. Then the seller came in and pushed the price down, thus forms like a shooting star. This pattern should be formed in a higher timeframe. Then we can analyze this pattern in the inner timeframe to check for structure formation. If the structure are formed as we discussed above, we have a high possibility that this pattern will work in the market. So we can take a Sell Entry in the next running candle.

Confirmation of Shooting Star Pattern

If the next candle of the Shooting Star breaks the previous support trend line, we can get confirmation that the market is going to fall. So we can short the market to make a profit.

Entry for Shooting Star Pattern

The Entry for the Shooting Star Pattern will be between the running candle open price and the previous candle high price. You can analyze in the inner timeframe to take entry in the sell range as shown below the image.

Then as shown above you can take sell entry, as the market will move downside according to our analysis

Stop Loss for Shooting Star Pattern

The Stop Loss for Shooting Star Pattern will be the high price of the Shooting Star

You can also make a Trailing Stop Loss as the market goes below by drawing a resistance line as shown in the above image.

Steps to check before taking the entry with this pattern.

Step 1: Search for the Shooting Star pattern in the higher time frame.

Step 2: Check if the pattern is in a high trend and the prior trend should be an uptrend.

Step 3: Check the Shooting Star structure –> it should be bearish –> the lower shadow should be 2 times or 3 times greater than the size of the body with perfect structure formation.

Step 4: Check the structure formation in the inner timeframe of the pattern. If you get the perfect structure move on to the next step.

Step 5: Set entry and stop loss level and execute the trade.

Step 6: Check for confirmation that the previous support line is broken, we also got confirmation that it is on a high trend, and the structure formation of the Shooting Star is perfect so the market will surely move down and we can make a huge profit.

Conclusion

Finally for the shooting star pattern the target will be open. You can set according to your risk to reward ratio. The shooting star pattern will best work in the market with above explanation and trading methodology. So learn and practice more in the market to make profit with this pattern. If you want to learn with us, you can reach Classroom Of Traders.

To get detailed information about the Shooting Star Pattern, Click and watch the video 👇