Evening Star

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Definition of 'Evening Star'

The evening star is a technical analysis pattern that is used to predict a bearish reversal in the price of a security. It is typically found at the end of an uptrend and consists of three candles. The first candle is a long green candle, the second candle is a small candle, and the third candle is a long red candle. The long green candle indicates that the uptrend is still in progress, while the small candle and the long red candle indicate that the momentum is starting to shift. The evening star pattern is considered to be a bearish reversal pattern because it suggests that the uptrend is coming to an end and that a bearish trend is likely to begin.

There are a few things to keep in mind when trading the evening star pattern. First, it is important to confirm the pattern by looking for other bearish indicators, such as a falling moving average or a negative divergence. Second, it is important to wait for the price to close below the low of the second candle before entering a short position. Third, it is important to use a stop-loss order to protect your profits.

The evening star pattern is a powerful tool that can be used to identify potential bearish reversals. However, it is important to remember that it is not a perfect indicator and that it should be used in conjunction with other technical analysis tools.

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