This shape is called a Shooting Star candle. It looks like a falling star, hence the name. It usually appears at the end of a period of rising prices and signals that prices may now fall (trend reversal). On your chart, this candle appears to have risen over the previous candles, so it could be a sign of a reversal. But it is not enough on its own – it needs to be confirmed by other factors, such as volume (the amount of trading) or another candle. If the next candle is also black and falling, this is a strong signal.
A Shooting Star candle is a sign that the power of buyers in the market is weakening. Imagine: at the beginning of the day the price is normal, buyers push the price up, but at the end of the day the sellers take control and push the price down again. It often appears near a “resistance level” (a high point that prevents the price from rising). If this candle is accompanied by high volume, it is even more reliable. But if it is on a smaller time frame (like 1 minute), it may be less reliable – it is better to look at a larger time frame (like daily).
How to trade?
You can base your trading decisions on this candle, but always manage your risk (use stop loss). Simple method:
Trade Entry
After this candle closes, if the next candle has also fallen, “sell short” (bet on the price falling). Example: Sell when the price goes below the low of this candle.
Stop Loss
Place it slightly above the high of this candle. If the price rises again, reduce the loss.
Target (Take Profit)
Target the previous support level (the lowest point where the price stops). Keep the risk-reward ratio 1:2 (Rs 1 risk, Rs 2 profit).
Use other tools
Confirm with RSI (overbought signal) or moving averages. You can see all this on Binance.
Always start trading with a demo account, and only risk money you can afford to lose.
Where can you trade this candle?
• Good place: At the end of a long-term uptrend (downtrend), especially near a resistance level. If the volume is high and there is negative news in the market, it is a good place to trade. Example: If it appears after a bull run in crypto, it is more likely to fall.
• Stronger: If there is a Doji or other weak candle before this candle.
Where can you not trade this candle?
• Bad place: At or in the middle of a downtrend (downtrend). It is not a signal, but may be just noise (meaningless).
• Incompatible: On low volume, or near a support level. Do not trade even if the market is sideways (neither up nor down). Or if this candle only appears on a small time frame but there is no downtrend on a large frame, ignore it.
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