How to Trade with Morning Star Signal

Trading with the Morning Star Signal is a simple yet powerful strategy. The Morning Star is a bullish reversal pattern, indicating a potential upward shift in a stock’s direction.

Here are the 7 easy and practical steps to execute a trade using Morning Star Signal:

1. Recognition of the Pattern:

• Look for a downtrend in the candle sticks.
• The first candle is a bearish candle (indicating the downtrend).
• The second candle is a small-bodied candle, often a doji or spinning top, signaling indecision.
• The third candle is a bullish candle that closes at least halfway up the first bearish candle.

2. Confirmation:

• After the first step wait for the pattern to complete. After the Morning Star pattern, look for the next candle to open higher.
• Check for higher trading volume during the bullish candle, with that confirmation we should know the increased buying interest in that particular stock.

3. Entry Point:

• Once you confirm the Morning Star pattern, consider entering a trade at the opening price of the next candle.

4. Setting Stop-Loss and Book-Profit:

Stop-Loss: Don’t forget to put a stop-loss just below the low of the first bearish candle.

Note: No strategy in the market works all the time. You must keep the stop loss for every trade you execute.

Book-Profit: Set a target for at least 1:2 risk-reward ratio and book profit when the price hits the target.

5. Risk Management:

Only risk a small portion of your trading capital on a single trade, usually a small percentage like 1-2% per day doesn’t effect a lot.

6. Monitor Your Trade:

Watch the execution of the trade closely. If the price starts moving in your favor, consider adjusting the stop-loss to increase the profit.

7. Exit Strategy:

• Exit the trade when the price hits the target level.
• If the price goes against your view, exit the trade when the stop-loss is triggered. You must maintain discipline while executing the trade.
• Most of the beginners do not close the trade even after the price goes in wrong direction, they finally end up in huge losses.

Every trader must remember that no strategy works all the time. It’s important to practice risk management, stay updated with market trends, and consider using technical analysis to confirm your trade decisions.