What Is the Evening Star Candlestick Pattern? How to Trade It

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The evening star candlestick is a three-candle bearish reversal pattern that forms after an uptrend. It has a large bullish candle, then a small-bodied candle that trades above it, then a large bearish candle that closes deep into the body of the first candle. Read together, the three candles show buying pressure peaking, stalling, and then giving way to sellers. The bullish mirror image is the morning star, which forms after a downtrend.

How the Evening Star Candlestick Pattern Works

The pattern spans three consecutive periods:

1. Candle one: a long bullish body. Price closes well above its open, extending the uptrend. Buyers are in control.
2. Candle two: the star. A small body, bullish or bearish, that opens above the first candle’s close, often with a gap up on stock charts. Buyers pushed price higher but could not move it much further by the close.
3. Candle three: a long bearish body. It opens below the star and closes well into candle one’s body, ideally past its midpoint, taking back a large share of candle one’s gains.

The midpoint test separates a real reversal signal from an ordinary pullback. A shallow close leaves buyers holding most of their ground, while a close below the middle of candle one shows the market has rejected the higher prices reached during the star.

Interpreting the pattern

How much weight a trader gives an evening star depends on context more than shape. The signal is stronger when the star forms at a known resistance level, after an extended advance, or when a momentum oscillator such as the Relative Strength Index is in overbought territory or diverging from price. Higher volume on the third candle also suggests real selling rather than a thin, quiet session. Volume is easier to judge in stocks than in spot forex, where traders see only their broker’s tick volume.

Evening Star vs. Evening Doji Star

In an evening doji star, the middle candle is a doji, with an open and close equal or nearly equal, showing a standoff between buyers and sellers. Some traders treat it as a stronger sign of exhaustion than a star with a small real body. The other candles and confirmation rules stay the same.

Example of the Evening Star Candlestick Pattern

Hypothetical example on a daily currency chart, for illustration only:

• Candle one: opens 1.0800, closes 1.0900. The body is 100 pips and its midpoint is 1.0850.
• Candle two: opens 1.0905, high 1.0925, closes 1.0912. The body is small and sits above candle one’s close.
• Candle three: opens 1.0895, closes 1.0835. The close is below the 1.0850 midpoint, so the pattern is complete.

A trader who sells at candle three’s close (1.0835) might place a stop above the star’s high, for example at 1.0930 for a small buffer. That sets the risk at 95 pips per unit, so the position is sized to keep a 95-pip loss within the trader’s risk limit, which a position size calculator can work out. A first target might be candle one’s low or open, or the nearest support level below.

Evening Star Pattern Trading: Entry, Stop and Confirmation

Traders tend to use one of two entry approaches:

• At the close of candle three. This entry comes earlier, but the trader acts before seeing any follow-through.
• After confirmation. The trader waits for a further close below candle three’s low, a break of a rising trendline, or a bearish crossover on an indicator such as MACD. The entry price is usually worse, but fewer signals fail.

The star’s high is the natural place for a stop, because a move above it cancels the idea that buyers have given up. Some traders base the buffer on volatility, for example a fraction of the Average True Range, so that normal noise does not trigger the stop. Profit targets often come from earlier support zones or Fibonacci retracement levels of the prior advance.

Evening star in forex

Spot forex trades around the clock on weekdays, so each daily candle usually opens at or near the prior close and the star rarely shows the gap common on stock charts. Many forex traders therefore accept a star whose body simply sits above candle one’s close, and rely more on the third candle’s close and the surrounding context.

How It Differs From Similar Patterns

• Shooting star: a single candle with a small body near the low and a long upper wick. It can appear as the middle candle of an evening star, but on its own it is a one-candle signal.
• Hanging man: a single candle at the top of an uptrend with a small body and a long lower wick. It needs no third candle to complete.
• Bearish engulfing: two candles, where a bearish body fully covers the previous bullish body.
• Dark cloud cover: two candles, where a bearish candle opens above the prior high and closes below the prior bullish body’s midpoint.

The evening star takes one period longer to form than these patterns. The extra candle adds information, but it also delays the signal.

Limitations of the Evening Star Candlestick Pattern

The pattern describes three past periods. It does not predict how far price will fall, and it fails when an uptrend pauses and then resumes. By the time candle three closes, much of the move may be over, leaving a small reward relative to a stop above the star. On lower timeframes, random fluctuations create many look-alike shapes with no trend behind them.

Analysts also disagree on how small the star must be, whether a gap is required and how deep candle three must close. Backtesting a fixed rule set on paper, for example in a stock market simulator, shows how the pattern behaves before real money is at risk.

The Bottom Line

Traders watching for tops in uptrending stocks or currency pairs can use the evening star as a warning that buying has stalled and sellers have taken over. Its value depends on context, a deep third close, and a stop above the star sized to the trader's risk limit. Because the pattern lags, fails when uptrends resume, and lacks one agreed definition, backtesting a fixed rule set before trading it with real money makes sense.