The Morning Star candlestick pattern is a powerful bullish reversal signal commonly used in ICT (Inner Circle Trader) trading strategies.
It indicates a potential shift in market sentiment from bearish to bullish and is often seen at key institutional levels, such as discount zones, order blocks, and liquidity sweeps.
1. Understanding the Morning Star Pattern in ICT
The Morning Star is a three-candlestick pattern that consists of:
- First candle: A large bearish candle, confirming a downtrend.
- Second candle: A small-bodied candle (can be bullish, bearish, or neutral) showing market indecision.
- Third candle: A strong bullish candle, signaling a reversal and shift in market structure.
Why is the Morning Star Important in ICT?
In ICT trading, the Morning Star aligns with institutional concepts like:
- Liquidity grabs before reversals.
- Bullish Order Blocks (B.O.B).
- Fair Value Gaps (FVGs) and price rebalancing.
- Change of Character (ChoCh) and Break of Structure (BOS).
2. Key ICT Concepts Related to the Morning Star Pattern
A. Liquidity Grab and Smart Money Reversal
- Institutional traders often sweep sell-side liquidity before a bullish reversal.
- Retail traders might interpret the bearish candle as a continuation of the downtrend.
- The small-bodied second candle shows hesitation, indicating that sellers are losing control.
- A strong bullish candle follows, confirming smart money buying.
Example:
- EUR/USD is in a downtrend, approaching a liquidity zone below a previous low.
- The first bearish candle breaks the previous low, triggering stop-losses of retail traders.
- The second candle is a doji, showing hesitation as smart money absorbs liquidity.
- The third bullish candle reclaims lost ground, confirming a reversal.
B. Order Blocks & Fair Value Gaps (FVGs)
- The Morning Star is often seen at Bullish Order Blocks.
- If it forms within an FVG, it signals that price is rebalancing before moving higher.
Example:
- GBP/USD approaches a Bullish Order Block after a prolonged downtrend.
- A Morning Star forms within the order block, rejecting lower prices.
- The third bullish candle confirms the smart money reversal.
- Price starts trending upward as liquidity shifts.
3. How to Trade the Morning Star in ICT
Step 1: Identify the Context
- Look for a downtrend with liquidity resting below recent lows.
- Identify discount zones, Bullish Order Blocks, and FVGs.
Step 2: Wait for a Liquidity Sweep
- The first candle should take out sell-side liquidity.
- The second candle should show market hesitation.
Step 3: Confirm Market Structure Shift
- A Break of Structure (BOS) or Change of Character (ChoCh) confirms reversal.
- Look for strong displacement (aggressive bullish move).
Step 4: Enter the Trade
- Enter near the midpoint of the third candle or at a retracement.
- Stop-loss below the second candle’s low.
- Target previous highs, premium zones, or resistance levels.
Example Trade Setup on USD/JPY
- USD/JPY forms a Morning Star near a Bullish Order Block.
- The third bullish candle breaks structure, confirming reversal.
- Trade entry at the retracement of the third candle.
- Stop-loss below the liquidity sweep.
- Target previous swing highs.
4. Mistakes to Avoid while Trading Morning Star Candlestick Pattern
- Trading the Morning Star in the wrong context (needs liquidity grab & market shift).
- Entering too early without confirmation (wait for BOS/ChoCh).
- Ignoring Smart Money concepts like FVGs and order blocks.
5. Final Thoughts
The Morning Star is a strong bullish reversal pattern in ICT trading, especially when combined with liquidity concepts, order blocks, and market structure shifts.
By using smart money concepts, traders can avoid false signals and improve trade accuracy.
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