What Is The Evening Star Candlestick Pattern & How To Trade With It

An Evening Star Candlestick Pattern is often used to detect a trend reversals. It consists of three candlesticks referring to a bearish pattern. The Evening Star appears when the market is in an uptrend, signifying the potential that a trend is about to end.

What is the Evening Star Candlestick Pattern?

The Evening Star is not just a combination of three candlesticks. Instead, it requires an understanding of the previous price action and an existing trend.

The Evening Star Candlestick Pattern emerges when the first candle is bullish, followed by a bearish/bullish candle, and the third is a bearish candle.

The first candle represents an uptrend market. The bulls are dominating, and there is no sign of a reversal.

The second one is a small candle that shows the first sign of a trend reversal. It can be bullish or bearish because the market is indecisive. Sometimes, the second candle is a Doji candlestick pattern.

The third candle describes a trend reversal. The bears are starting to dominate, and the market may now be in a downtrend.

Here’s what the Evening Star Candlestick Pattern looks on a chart.

Evening Star Candlestick Pattern on a chart
Evening Star Candlestick Pattern on a chart

As you can observe, after the Evening Star, there is a reversal of a trend.

The Evening Star Candlestick Pattern is the opposite of a Morning Star candlestick pattern, a bullish candlestick pattern, frequently appears in the forex market and can be easy to identify.

How to use the Evening Star Candlestick Pattern?

The Evening Star is a strong predictor of future price declines, indicating a downtrend. However, it can show a failed reversal.

This means the market can go in an uptrend even though the Evening Star occurs on the chart. To avoid this, we can use momentum oscillators like the RSI or use time-based filters.

The RSI when combined with the Evening Star can help identify the overbought and oversold conditions. When the RSI is above level 70, it is seen as an overbought condition. And, when the RSI is below 30, it’s seen as an oversold condition.

One thing to remember is to identify overbought and oversold conditions to a second candle. Traders dont always apply these conditions to a third candle as it shows a new trend because the RSI can turn down after the formation of a bearish candle.

On the chart below, you can see the RSI level going down after the last bearish candle of the Evening Star.

The RSI and the Evening Star Candlestick Pattern
The RSI and the Evening Star Candlestick Pattern

You can also apply time filters with the Evening Star as some forex pairs are bullish and bearish at certain times.

For example, if the EUR/USD moves upwards during a London Session and you notice the Evening Star Candlestick Pattern, there may be a setup coming to go short.

By combining the Evening Star with the RSI or time filters, we can find if the market has entered the overbought or oversold zone. This will help to filter the chances of a failed reversals, which can of course still occur such is the nature of trading forex online.

Evening Star Candlestick Pattern trading strategy

By applying the Evening Star in your trading strategies, we can find potential setup signals and filters for our own unique forex trading strategies.

Just like the RSI, you can use Bollinger bands for helping to determine overbought and oversold conditions.

The Evening Star Candlestick Pattern doesn’t give a buy signal as it is primarily used for going short. For a buy entry, we would use the Morning Star Candlestick Pattern. The Morning Star appears in a downtrend and can signal the upward market.

Using both the Evening and Morning Star, we can find a buy and sell strategy as both are inverse of each other.

Morning Star Candlestick Pattern buy strategy

  • The market should be in a downtrend.
  • Wait for the price bar to go bullish before entry.
  • Set a stop-loss near the recent swing low.
  • Exit when the trend declines.
Morning Star Candlestick Pattern buy setup
Morning Star Candlestick Pattern buy setup

Evening Star Candlestick Pattern sell strategy

  • The market should be in an uptrend.
  • Wait for the price bar to go bearish before entry.
  • Place a stop-loss near the recent swing high.
  • Exit when the trend rises.
Evening Star Candlestick Pattern sell setup
Evening Star Candlestick Pattern sell setup

Evening Star Candlestick Pattern Conclusion

The Evening Star Candlestick Pattern can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy. The Evening Star is often an indicator of a trend reversal.

I would prefer to use the majority of candlestick patterns such as the Evening Star Candlestick Pattern on the 1-hour charts and above. I tend to find that these charts contain less market noise than the lower time frames and thus give more reliable signals for my forex trading strategies. This also means that I spend less time staring at charts and can also set alert notifications to let me know when price has reached certain levels, candlestick pattern has been formed or a particular indicator value has been reached.

The Evening Star Candlestick Pattern is just one method of market analysis amongst thousands. I would not build a trading system alone, but rather combine with other technical indicators such as moving averages, Parabolic SAR, Stochastic Oscillator, RSI, ADX and price action analysis.

Of course, every trading system will generate false signals which is why money management is so important. I would personally be implementing sensible money management and only take traders that give me a favorable risk to reward ratio, ideally of at least 1:3. This means that one losing trade does not wipe out consecutive winners.

The methods of implementing the Evening Star Candlestick Pattern into a trading strategy that are outlined within this article are just ideas. I would always ensure that I have good money management, trading discipline and a trading plan when using any forex strategy.

Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all entries. You should trade forex in a way that suits your own individual style, needs and goals.

If you would like to practice trading with the Evening Star Candlestick Pattern, you can open an account with a forex broker and download a trading platform. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.

Happy trading!