I've noticed that many traders miss one of the most reliable signals of a trend reversal. It's about the shooting star pattern — a candlestick configuration that often precedes a reversal from an uptrend to a downtrend.

The pattern looks simple: one candle with a small body at the bottom and a long upper shadow, which makes up more than two-thirds of the entire length. The lower shadow is minimal or absent altogether. What does this mean? Buyers initially pushed the price up, but sellers took control and pushed it back down before the close. This reflects a balance of power on the chart.

This configuration is especially effective in the context of an uptrend. The longer the rise continues, the higher the probability that the shooting star will act as a signal for a reversal. I’ve noticed it triggers much more often when it forms at resistance levels or previous highs — where a reversal makes logical sense.

Trading volume during the formation of the pattern is what really matters. High volume confirms serious selling intentions and significantly increases the reliability of the signal. If the volume is low, I usually wait for additional confirmation.

How do I apply this in trading? First, I wait for the next candle to close below the shooting star’s close level — that’s confirmation. Only then do I open a short position. I place the stop-loss above the pattern’s high to minimize risk. The take-profit is set at nearby support levels.

It’s very helpful to combine the pattern with other indicators like RSI or MACD. If they also show overbought conditions or signs of a reversal, the signal becomes much stronger. This is especially useful for filtering out false signals.

A practical example: an asset in a steady uptrend approaches a resistance level and forms a shooting star. The next candle closes lower — I open a short, place a stop above the high, and wait for a move toward support. Simple and effective.

Of course, the pattern doesn’t guarantee 100% success, but in the right context, it’s one of the most reliable reversal signals I use. It’s worth adding to your arsenal if you haven’t already.