Evening Star

Overview

The Evening Star is a three-candle reversal pattern that signals the potential end of an uptrend. Originating from Japanese rice trading in the Edo period, it remains one of the most trusted reversal formations in candlestick analysis.

The name refers to Venus appearing in the evening sky — symbolizing the transition from light (bullish) to darkness (bearish), just as the market shifts from an uptrend to a downtrend.

Structure & Theory

The Three Candles

Candle 1: Large bullish candle (shows strong buying momentum)
Candle 2: Small body (spinning top or doji). Gaps up from candle 1
Candle 3: Large bearish candle. Closes below the midpoint of candle 1

Formation Criteria

• Candle 1: A clear bullish candle reflecting the prevailing uptrend momentum
• Candle 2: Small real body (spinning top, doji, etc.). Ideally gaps up from candle 1
• Candle 3: A clear bearish candle that penetrates past the midpoint of candle 1's body

Gaps increase the pattern's reliability, but in 24-hour markets like forex where gaps are rare, the pattern is often considered valid without them.

How to Read

Entry Points

• Enter short after candle 3's close is confirmed
• Conservative approach: enter only if the following session breaks below candle 3's low

Stop Loss

• Place stops above the high of candle 2 (the small-body candle)
• This allows immediate exit if the pattern is invalidated

Profit Target

• Target the nearest support level
• Alternatively, use a risk-reward ratio of 1:2 to 1:3

How to Read

OANDA:USDJPY

Market Psychology

Limitations

Related Indicators

• Moving Average: Confirm trend direction to increase pattern reliability