How to trade the bullish morning star pattern

Everyone knows the importance of price action trading signals. Many experienced traders often consider it to be the best trading system in the world. Though price action trading strategy is extremely profitable, still the pro traders have to face frequent losing trades. Regardless of the trading strategy, you are bound to lose money in the Forex market. So, how do the pro traders make money if losing trades are inevitable? The answer lies within risk management policy. As a currency trader, you should never trade the market with negative risk-reward ratio. Make sure the winners are always bigger than the losers since it will help to recover the loss.

We all know the importance of price action trading strategy. But learning the details in a single article is not possible. So, we are going to discuss the bullish morning star pattern and give you a clear guideline to use it like a pro trader.

Formation of the bullish morning star pattern

The basic formation of the bullish morning star pattern is fairly easy. The pattern consists of three unique Japanese candlesticks. The first candle is a bearish candlestick which is a part of the previous downtrend. The second candle is doji or a bullish pin. The third candle which acts complete the pattern is strong bullish candle which indicators the buyers are taking control of this market.

The validity of the bullish morning star

The novice traders often complain they are losing money by using the bullish morning star pattern. But do you think they are trading the valid candlestick? The simple answer is NO. Unless you spot this candle at the critical support level, chances are very high the market will not regain bullish movement. For this very reason, the smart traders in the exchange traded funds industry always look for bullish morning star pattern at the crucial support level. Such approach dramatically improves their win rate.

Setting up the stop loss

No matter which trading strategy you use, you must focus on the proper stop loss. As a new trader, you might be biased with the bullish morning star pattern and execute the trade with high risk. But this is where the pro-UK traders are one step ahead. They never execute any trade with more than 2% risk since they know the outcome of any trade is completely random. Never risk more than 2% of your account balance even though you will be trading the market with a power candlestick pattern. Set the stop loss just below the doji of the bullish pin bar and let the market do its duty.