Three candles, one price that decides the short

Evening star pattern trading starts with a three-candle top that forms after a rise. The first candle is a long rising one. The second has a small body of either colour. The third is a long falling candle that closes below the midpoint of the first candle's body.

The rise has to come first. The same three candles inside a decline are no evening star, and they mark nothing. When an evening star fails, check the trend before blaming the pattern.

Some details are left to judgment. How small the middle body must be is never pinned down, and neither is how far the rise must run. Write your own limits down so you apply them the same way each time.

The morning star is the mirror image at a bottom, with support at its lowest low.

Resistance sits at the highest high of the whole pattern. That is often the middle candle's high, but check all three wicks. Use the extreme, never a body or a close.

Draw it on the daily, 4-hour or 1-hour chart, using regular trading hours for stocks and ETFs. Patterns on a 5-minute chart are easier to spot, but levels do not come from there.

Run two checks before you rely on the line. If another pattern marks the same price, confidence goes up. If another level sits so close that a trade between them could not pay, the two become one zone. Inside a zone you do nothing.

Once drawn, the line works both ways. Below it, the bias is down. A close back above it ends the idea.

Stop and target both come from the chart. So you can work out, in advance, the lowest price where a short still pays two to one.

Say the highest high is 188.00 and the next support down is 185.00. The stop is a close above 188.00. Selling at 187.00 risks 1.00 to make 2.00, exactly two to one. Selling at 186.50 risks 1.50 to make 1.50, which fails the test.

Mark 187.00 on the chart. If price falls through it before you get in, the trade is gone for today. Let it go rather than chase a worse ratio. Write the number in your plan next to the stop and target. These prices refer to the underlying chart, because option premiums move by different amounts.

Price tends to travel from one level to the next. So the target is the next support below, and nothing more ambitious than that.

An open rising window below also works as a target. A window is a gap between two adjacent candles with no overlap, drawn as a box from edge to edge. Treat its upper edge as the first place price may stall. Do not count on the gap filling, because that is a separate idea and a weak reason to trade.

If a strong candle in your favour pushes into the target area, selling part there is reasonable. Trail what is left.

Remember that a reversal only means price stopped and turned for now. It does not promise a return to where the rise began, so keep the target modest.

Once you are short, stay in until a candle closes above the pattern's highest high. A wick that pokes through and falls back is no exit signal.

Decide which candle close counts before you enter. A 5-minute close and a 1-minute close can give different answers, and that choice is a judgment call. Write it in your plan.

This rule has a practical gap. A resting stop order triggers on the wick, which is exactly what the rule ignores. So either watch the chart near the level, or accept that a resting order will sometimes take you out early.

With same-day puts, time is a second stop. If the drop has not started within five candles of your entry timeframe, get out.

Ten checks, top to bottom, before every order. Any no means no trade, however good the pattern looks. Write the answers down, so your later review has something to check.