Explore the Evening Star and Abandoned Baby candlestick patterns, their recognition, trading strategies, and effective risk management tips.

  • Evening Star: A common 3-candle pattern signaling bearish reversals in uptrends. Success rate: ~72%.
  • Abandoned Baby: A rare but powerful 3-candle pattern with isolated gaps. Success rate: 65%. Median return: -3% over 20 days.

You can leverage LuxAlgo’s Price Action Concepts toolkit on TradingView to automatically identify these reversal setups.

Key Features:

  • Evening Star: Large bullish candle → Small indecisive candle → Large bearish candle.
  • Abandoned Baby: Strong candle → Doji with a gap → Opposite strong candle.

Quick Comparison:

Pattern Frequency Success Rate Typical Return Key Market Use
Evening Star Common ~72% Varies Bearish reversals
Abandoned Baby Rare (50/20 yrs) 65% -3% (20 days) Strong trend shifts

Pro Tips: Use RSI, MACD, or volume analysis for confirmation. Stick to trending markets for higher accuracy.

Ready to dive into the details? Let’s break it down further.

What is an Evening Star – Candlestick Pattern Guide

Evening Star Pattern Recognition

Evening Star Candlestick Pattern Illustration

The Evening Star is a well-known reversal pattern with a ~72% success rate. Recognizing its three-part structure accurately is key for making informed trades.

3 Parts of the Evening Star

This pattern is made up of three specific candlesticks that reflect a shift in market sentiment from bullish to bearish:

Candle Characteristics Market Significance
First Large bullish candle Shows strong buying pressure and upward momentum
Second Small body (doji or spinning top) Signals indecision and weakening upward momentum
Third Large bearish candle Indicates sellers gaining control and potential reversal

A deep penetration by the third candle confirms sellers are taking charge.

Pattern Identification Guide

  • Clear uptrend before the pattern develops
  • Second candle often gaps up from the first (less common in FX)
  • Third bearish candle typically shows higher volume
  • Use RSI or MACD to confirm the signal

Common Pattern Mistakes

Misidentifying the Evening Star is a frequent error. Ensure market conditions align before acting:

  • Confirm uptrend via trendlines or moving averages
  • Check volume expansion with OBV or VWAP
  • Wait for full close of the third candle
  • Ensure the third candle breaks key support
  • Use RSI or MACD for extra confirmation

"A powerful reversal indicator: the Evening Star is a reliable signal for bearish reversals, often appearing at the peak of uptrends."

Abandoned Baby Pattern Recognition

Abandoned Baby Candlestick Pattern Illustration

The Abandoned Baby is a three-candle signal that suggests strong reversal potential when it appears, thanks to its strict non-overlapping gaps.

Pattern Structure

Component Bearish Pattern Bullish Pattern
First Candle Strong bullish Strong bearish
Middle Candle Doji gapping above Doji gapping below
Final Candle Bearish candle gapping down Bullish candle gapping up

Bearish vs Bullish Variations

  • Bearish: Occurs in an uptrend when the doji gaps above.
  • Bullish: Occurs in a downtrend when the doji gaps below.

Pattern Confirmation

  1. Volume Analysis: High volume on candles 1 & 3, lower on the doji.
  2. Technical Indicators: Look for MACD divergence, RSI near extremes, price at key S/R.
  3. Market Context: Best at significant levels or within strong trends.

Performance Insights

Historic data shows ~65% success for the bearish version over 20 days, but it misses targets ~43% of the time—highlighting risk management importance.

Trading Both Patterns

Clear entry, exit, and risk rules are essential once the patterns are identified.

Trade Entry & Exit Rules

Pattern Type Entry Point Stop Loss Profit Target
Bullish Abandoned Baby After third candle in downtrend Below doji’s low 2–3× risk
Bearish Abandoned Baby After third candle in uptrend Above doji 2–3× risk
Evening Star At close of third candle Above second candle’s high Previous support levels

Risk Management Steps

  • Position Sizing: Risk ≤ 2% of capital per trade.
  • Stop Loss Placement: Just beyond entry candle extremity.
  • Profit Targets: Aim for ≥ 2:1 reward-to-risk or key S/R zones.

Adding Technical Indicators

Indicator Use Case
Moving Averages Confirm pattern direction
RSI Spot overbought/oversold
Volume Analysis Confirm spikes on key candles
MACD Identify divergences

Combining multiple tools refines strategy and boosts confidence in your trades.

Pattern Analysis Methods

Timeframe Analysis

Timeframe Best Use Case Reliability
Weekly/Daily Swing trading, major reversals High
4-hour Intraday positions Moderate
1-hour Day trading Lower (more false signals)

Volume Analysis

Stage Volume Significance
First Candle Low–Moderate Pattern start
Second (Doji) Lower Indecision
Third Candle High spike Confirms reversal

Market Context

  • Check major support & resistance.
  • Align with higher-timeframe trends.
  • Consider upcoming economic events.

Conclusion

Pattern Overview

The Evening Star offers a clear three-candle reversal signal, while the Abandoned Baby’s gap isolation highlights its strength as a reversal indicator.

Trading Tips

  • Placement: Ensure patterns form in established trends.
  • Stop-Loss: Just beyond pattern extremes.
  • Confirmation: Look for RSI/MACD signals and full candle closes.
  • Automation: Use LuxAlgo’s alerting features to catch patterns in real time.

References