The Most Clear-Cut Reversal Signal

Focus: FOREX

Walker England of DailyFX.com explains why candlestick patterns provide traders with the best means of predicting market turns.

One of the toughest tasks given to traders is spotting price reversals. There are a variety of tools at the disposal of technical forex traders for the job, but more often than not, it is a candlestick pattern that provides the first clues to a market turn. Candlestick patterns are a great way to begin your trading analysis as they are a direct interpretation of price action. With this in mind, today we will focus on spotting and trading one of the market’s most clear-cut reversal signals using the bullish morning star pattern.

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What is a bullish morning star pattern?
A bullish morning star pattern is a candle pattern established at the end of an extended downtrend. The pattern itself is pictured above, and it should be noted that the bullish morning star is comprised of three different candles. The first candle should depict a continuation of the established down trend. The second candle will show the slowing of bearish momentum. Price will make one final attempt at lower lows here, with the candle closing near its open price.