How to trade the Bullish Morning Star

One of the hardest jobs given to Foreign exchange traders it determining price reversals. There are so many trading strategies for the task, but more often than not it is a Forex candlestick formation that gives the accurate signals to a market reversal. Forex candlestick formation are an accurate method to start your Forex trading strategy as they are a straight perception of price action. with this in mind, today we will learn on determining and trading one of the Forex markets most right cut reversal clues using the Bullish Morning Star candlestick formation.

A Bullish Morning Star candlestick formation is a candlestick formation used at the end of an extended bearish trend. This formation is comprised bearish trend. The 2nd candlestick will give the slowing of bearish candlestick momentum. Market price will make one attempt at lower lows here, with the candlestick closing close its opening price.

The third candlestick in the Bullish morning star formation is the accurate reversal signal. An extended blue candlestick should be seen in this formation starting a new move in bullish momentum. Basically this should be a bullish engulfing candlestick with its high above the high of the previous candlestick. This strong move in market price depicts fresh buying movement on the currency with bearish traders exiting the trading market. The bigger of this secondary candlestick declines, the stronger the reversal potential is considered.

How to use Bullish Morning Star in trading ?

The amazing part about the bullish morning star formation is the fact that once you can determine it, you can use it to your trading system right away.

In the example chart above , rally was preceded with a bullish morning star giving us our first chance to consider trading reversal and giving buying chances.

Forex traders often pick to trade a breakout system in reversal markets. In a breakout trading the high of the first candlestick of the formation can be traded as an area of resistance level. Buy entry can be plot at this level as the currency starts to trade to higher highs. Also sometime traders use Bullish Morning Star trading strategy with an oscillator indicator. Trading position can plotted in the trend direction if indicator such as Relative strength index RSI show momentum reversing from oversold area. Foreign exchange trader should placing a stop loss order below the second candlestick low. In the case that a reversal fails and a lower low is built traders will want to exit their trading activity.