This guide will discuss the Evening Star Pattern that is a trend seen in crypto assets and the traditional financial markets.
If you have not heard of this before, it is because it is part of the market’s technical analysis segment. While many traders may turn to the fundamental aspect of investing, there are those who look at charts, numbers, volume, and sentiment to decide how they will move their money.
Those that turn to fundamental analysis will look at surface level facts and then dive into the coin or asset further. Those who use technical analysis will study the market overview through signals, indicators, and charts to determine market movements.
Those in the technical analyst category will happily view price charts and use patterns such as the Evening Star to see if the cryptocurrency market will move up or down. If an Evening Star pattern were to come about an analyst or trader would make the decision to short the market, for they would sense that the digital asset would decline even further. If it were to decline, they could gain more value by trading on margin and other strategies.
Now, remember that nothing in trading is simple, but that is why you must know more about patterns such as the Evening Star to minimize complexity within your life.
Facts about the Evening Star Pattern
The Evening Star speculation trend is one that is in the toolkit of a wide variety of chartists and technical analyst speculators. These analysts use the Evening Star along with other components to guide them in their crypto trading activities. One primary use of this pattern is the fact that it can tell them if the market will start to move in a different direction, precisely, the opposite direction.
In most cases, the Evening Star will indicate a negative trend or one where the market will go down. You will find three candles in this trend. The first one is a very big white body. The next one will be much less big, and then you will see a candle with a decidedly reddish hue.
You will see these trends occur when the market is a peak in a session. Further, you will notice that it will indicate a potential closing of the bull season in that session. That is why it is called an evening star pattern. The sunshine is going away; darkness is on the horizon. Conversely, with a Morning Star pattern, you will see that a positive uptrend is on the way, as a new day awaits and opportunity for positive progress abounds.
A Simple Summary Regarding the Evening Star Pattern
The Evening Star’s simple concept is that it could help show the way of decline in a crypto asset sentiment. You can see how people are turning negative on an asset due to the formations in the charts, and you can set yourself up to defend against such an issue.
There is one thing you must know and be aware of when thinking about the Evening Star pattern. It comes about in a blue moon. It is very scarce, but it is one that sophisticated and expert speculators will pay attention to over the course of their trading journeys.
Here’s the main reason they will study it and make moves when it comes by on their screens; it is one that continues to be reliable. As such, they will prepare for a winter session, and make sure to go defensive.
Let us take a look at how they work in the real world today.
The Inner Workings of Evening Star Trends
We will look at the inner workings through the lens of a candlestick chart. Now, suppose you are not familiar with the candlestick chart. In that case, it is a chart that has candlesticks made of bodies and wicks that represent closing, opening, top points, and low points and will relay price information about a digital asset for a specific session.
It is essential to note here that the candle will have a body, one wick or shadow on top, and one wick or shadow at the bottom. When you look at the candle, you must realize that the body’s size represents the distance between the top point and low point in that session.
As such, a big candle means that a large price variance did occur, while a smaller body shows a minimal difference in the price. Now, stated in different terms, big bodies show substantial activity in positive or negative sentiment varying on the context. Small size candlesticks mean minimal price action.
Traders note that the Evening Star trend is not tricky and will provide a clearer picture of what the future might hold. If you have been paying attention, you will note that it is a bleak near-term future as the price of the beloved digital asset is almost certain to decline.
Now, the Evening Star’s timeframe is at maximum, three trading sessions (measured in days). The first session will have a huge white body, that lets you know prices are rising. The next session shows a small candle with a decent rise in the price. Yet in the final session (the third day), you will see a huge candle that is of reddish hue that begins to show the descent with the open a lower price and at the close that is less than the first day.
As you see this formation, you will make your bets accordingly, as you know that a very likely downtrend is going to come to the picture. But the fact is that it is not always very simple to discern as other pieces of information can cloud your vision. Those who are wise and experienced will turn to price oscillators and other charting methods such as trendlines to confirm the Evening Star.
Now, make no mistake here, the Evening Star is one of several downward trend indicators that is present within the marketplace. You have quite likely heard about the negative harami, unfortunate smothering of the flames, and the cloud of darkness. Recall that different speculators will look at different patterns to make sure that it will go in a negative direction and take action.
Conclusion
That is the Evening Star in a nutshell. It will help you to watch out for negative price action and get ready to defend yourself or go on the offensive.
How you react to the information is up to you. But it is always essential to be there to read the charts and make decisions accordingly. It is undoubtedly not easy, but it is worthwhile as you will start making decisions in a data-driven way.