Morning Star Pattern

Instructor's Response:

That is a good plan...

The Morning Star pattern is often used by traders as an early indication that the direction of the pair may be changing.  While the example on your chart is not textbook, I can see how you came to the conclusion.  Since the pattern is comprised of three candlesticks (an elongated red candle with a defined downtrend, a second smaller bodied candle that can be either color that closes below the first red candle in the pattern, and a large bullish candle that opens above the second candle and closes near the center of the first candle's body) it is important not to make a trading decision based on the pattern until that third candle closes.  The long entry would then be made at the open of the next candle after the pattern completes itself.  See the chart below...

Also, when placing a stop, it is avisable not to place it precisely at the low of the wick. Conceivably, price could trade down to that same level again and, if so, there would be a stop out potentially before the trade moves back in the direction of your intended trade. The pairs need to have a bit of "breathing room" in instances such as these.