Shooting Star Candlestick Pattern Explained & Backtested (2024)

The shooting star candlestick pattern is a one-bar bearish reversal Japanese candlestick pattern that historically leads to near-term volatility.

You might be shocked that you’ll lose money if you trade this pattern using traditional candlestick charting methods.

Keep reading to shoot for the stars and learn the best trading strategies for this one-bar pattern.

What Is a Shooting Star Candlestick Pattern?

The shooting star is a one-bar bearish reversal candle.

This shooting pattern gets its name from its shooting star-like appearance on a candlestick chart where the price is coming down to earth.

Before we send our profits to the stratosphere, let’s learn how to identify the one-bar shooting star pattern.

How to Identify the Shooting Star Candlestick Pattern

The following are the requirements for a valid shooting star candlestick pattern:

• A small candle that gaps up with a long upper shadow and little to no lower shadow.
• The shooting star must occur in an uptrend.

We see the shooting star pattern on the Apple (AAPL) daily chart on November 22rd, 2021.

We see an active bullish trend as the price is above the fifty-day moving average. A single red bearish candle with a long upper wick that closes at the low fulfills the shooting star candle pattern’s requirements.

Now that we can identify this one-bar pattern, let’s learn the best shooting star trading strategies.

How to Trade the Shooting Star Pattern

History tells us to capture the near-term volatility using bullish mean reversion strategies in the crypto and stock markets and a bearish mean reversion strategy in the forex markets.

Let’s learn how traditional technical analysts shoot themselves in the foot, and then we’ll learn how to shoot for the moon.

Shooting Star Bearish Reversal Trade Setup

We see a single green candle; remember, candle color doesn’t matter, with a long wick, short body, and almost no lower shadow in an uptrend. With the shooting star pattern identified, traditional traders enter short at a break of the low, setting a stop loss above the shooting star high.

We see that this shooting star trade produced profits, but these unsuspecting traders are on the wrong side of history.

Let’s learn how professional crypto and stock traders make money with this single candlestick pattern.

Shooting Star Bullish Mean Reversion Trade Setup

Data-driven crypto and stock traders enter long when the price drops below and retraces above the pattern low, setting a stop loss of one ATR.

Let’s use the Ethereum (ETHUSD) daily chart to clarify this.

The low occurs on July 6th, 2019, at  $285.31. The price moves below and back above the low the next day, triggering an entry. 

These data-driven, professional traders added to their ether using history as their guide. 

Forex traders in the know capture volatility in the opposite direction.

Shooting Star Bearish Mean Reversion Trade Setup

Let’s practice identifying the shooting star candlestick pattern.

There’s a strong bullish advance upward, with the price pushing away from the fifty-day simple moving average. We see a short-bodied candle with a large upper wick and tiny lower shadow, fulfilling the shooting star candle pattern requirements.

Professional, data-driven forex traders short after the price moves above and then back below the shooting star high, setting a stop loss of one ATR.

We’ll use the Euro (EURUSD) daily chart on June 5th, 2020.

The candle’s high is 1.13839. The price moves above and below this price on June 10th, triggering an entry. These currency traders going short on this bearish candlestick pattern produced profits.

Speaking of profits, what can history tell us about the best shooting star trading strategies?

Does the Shooting Star Candlestick Pattern Work? (Backtest Results)

I backtested the shooting star pattern on the daily timeframe in the crypto, forex, and stock markets using the following rules:

• A close above the 50-day SMA constitutes an uptrend.
• I tested risk-reward ranges from 1 to 5. 
• The optimal risk-reward ratio is selected using profit per bar.
• Entry and exits are discussed in the how-to trade section above.
• Confirmation must occur within three days of the pattern signal.

Similar Candlestick Patterns

Multiple candlestick patterns are often confused with the shooting star. It’s essential to know how to identify each pattern to shoot your portfolio’s profits to the star using candlestick pattern analysis.

Hammer vs. Shooting Star

The hammer candlestick is a one-bar bullish reversal pattern that’s the opposite of its shooting sister. The difference between the hammer and the shooting star is that the hammer is a short-bodied candle with a long lower wick and little to no upper shadow. In contrast, the shooting star is a short-bodied candle with a large upper shadow and little to no lower shadow.

Inverted Hammer vs. Shooting Star

The inverted hammer is a one-bar bearish continuation candlestick with a short real body, a long upper wick, and little to no lower wick. The only differences between that inverted hammer and the shooting star are that the inverted hammer occurs in a downtrend instead of an uptrend. The first candle must open below the previous candle’s close; this isn’t a requirement in the shooting star.

Hanging Man vs. Shooting Star

The hanging man is a one-bar bullish continuation candlestick pattern. You’ll get a hanging man candle if you flip a shooting star on its head. The hanging man has a short real body with a long lower wick and little to no upper wick, whereas a shooting star has a short body with a long upper shadow and little to no lower shadow.

The Bottom Line

The shooting star is a frequently occurring one-bar bearish reversal candlestick pattern. Historically this pattern leads to near-term volatility that data-driven traders capture using mean reversion strategies. The frequency and performance of this pattern make it one of the best crypto candlestick patterns.