Evening Star Pattern Strategy

The Evening Star mirrors the Morning Star but indicates a potential top. It begins with a strong bullish candle, followed by a small indecision candle, and ends with a bearish candle closing below the midpoint of the first bar.

Testing indicates an average annual return of about 100%. It performs best in the forex market.

The algorithm watches sequences of three candles. When the pattern forms, it enters short with a stop above the small middle candle's high. Positions exit once price drops beneath the confirmation candle's low or if the stop is triggered.

Since the setup anticipates a quick reversal from overbought conditions, trades typically aim for short, momentum-driven moves lower.

Details

• Entry Criteria: Three-candle Evening Star pattern.
• Long/Short: Short only.
• Exit Criteria: Price below confirmation bar low or stop-loss.
• Stops: Yes, above middle candle high.
• Default Values:
  • CandleType = 5 minute
  • StopLossPercent = 1
• Filters:
  • Category: Pattern
  • Direction: Short
  • Indicators: Candlestick
  • Stops: Yes
  • Complexity: Intermediate
  • Timeframe: Intraday
  • Seasonality: No
  • Neural networks: No
  • Divergence: No
  • Risk level: Medium