Morning star
A three-candle bottom reversal:
- Candle 1 — a long bearish candle, in a decline.
- Candle 2 — a small body, ideally gapping below candle 1. This is the "star". It can be bullish or bearish; the point is that it is small.
- Candle 3 — a long bullish candle that closes well up into candle 1's body.
Read it as a narrative. Sellers are firmly in control (1), then the selling simply stops — nobody is willing to push lower, and the period produces almost no net movement (2), then buyers take over decisively and reclaim most of the first candle (3). The middle candle is the tell: the trend stopped working before it reversed.
Evening star
The mirror at a top: a long bullish candle, a small-bodied star gapping above it, then a long bearish candle closing down into the first candle's body.
Why this is a better pattern than most
It contains its own context. You cannot have a morning star without a decline beforehand, because candle 1 has to be a long bearish candle in a downtrend. And it contains its own confirmation, because candle 3 has to be a strong bullish candle. That is genuinely more structure than a single candle offers, and it is why three-candle patterns tend to be more reliable than one-candle ones.
It is also much rarer, which is the other side of the same coin. On a daily chart you might see a handful of clean morning stars a year per instrument.
The gap requirement, and why you can relax it on CFDs
Classic definitions want a gap between candle 1 and the star, and another between the star and candle 3. On a 24-hour CFD market, true gaps mostly occur over the weekend. Intraday, what you will actually see is the star's body sitting below the prior body rather than a true gap. That is an acceptable substitute — the logic (selling paused) is the same.
How to check this yourself
Find five morning or evening stars on a daily chart and measure two things: how far candle 3 closed into candle 1's body, and what price did over the following ten bars. You will notice that the ones where candle 3 reclaimed more of candle 1 behaved better — which tells you that the "close well into the body" clause is doing real work rather than being decorative.