[Summary]
The evening star is a three-legged pattern that suggests a reversal after a rally.
The Evening Star is not only a story about reading market prices, but also a material for checking where you tend to get impatient.
In actual investment, we start by using it to confirm a stall in the high price range. However, we cannot overlook the fact that there are many deceptions when the market is strong.
In this article, I will organize the Evening Star not as "knowledge" but as a procedure to check before buying or selling. Don't rush to conclusions, read according to your financial amount and time horizon.
First of all, let's divide by the evening star
When looking at the evening star, first decide what you want to judge. The information you need will change depending on whether you want to know the meaning, confirm before buying or selling, or review your current holdings.
Especially for beginners in investing, the easier the words are, the more they tend to take them as a conclusion. The evening star is not the only material for making decisions. If you want to check it, it is more realistic to look at it in conjunction with fund management, holding period, and opposing materials.
The evening star and the gap in emotions
If you look at the evening star as an investment psychology, first of all, make narrow assumptions. It is important not to mix up whether you are talking about the market as a whole, individual stocks, NISA or long-term funds.
If you check the following points, things will be much more organized.
| Axis to check | What to see in the evening star |
|---|---|
| purpose | What do you use to judge? |
| Time axis | Which is closer to short-term trading, long-term holding, or NISA? |
| basis | Which one is more important: price, business performance, interest rates, exchange rates, or psychology? |
| risk | When things go the other way, where should you look again? |
| action | Will it lead to buying, selling, or doing nothing? |
Points that can easily cause trouble in making decisions
It's not only when you lack knowledge that you stumble on the Evening Star. In fact, there are situations where we interpret something conveniently because we know a little bit about it.
- Record your anxiety and sense of relief when you see the evening star
- Write down the same number of reasons why you want to buy and reasons why you don't.
- Wait a day before making decisions after unrealized losses or sudden rises.
- Reduce trading amounts on days when emotions are strong
The important thing here is not to settle on just one correct answer based on the evening star. In investment, the meaning of the same material changes depending on the market, holding period, and amount of funds. When in doubt, prioritize confirmation over conclusion.
Checklist before buying and selling
Before using the Evening Star as a basis for making an actual decision, check at least these five things.
- Can you explain in one sentence the purpose of looking at the evening star?
- Have you confirmed one or more countermeasures or failure conditions?
- Are you investing your living funds or money that will be used soon?
- Have you decided in advance the criteria for cutting losses, taking profits, and continuing to hold stocks?
- Are you making judgments based only on social media or short headlines?
Checklists are simple, but they prevent you from adding reasons after making a decision. The purpose of checking the evening star is not to speed up your actions, but to reduce unnecessary errors in judgment.
Summary
The Evening Star is a resource for organizing your investment decisions. Even if you read it as an investment psychology, if you treat it as a standalone buy or sell signal, your judgment will be inaccurate.
The points to keep in mind are as follows.
- Decide first the purpose of seeing the evening star
- Do not mix time axis and amount of funds
- Check not only good materials but also negative materials
- When using NISA and long-term funds, consider how to handle losses
- When in doubt, reduce your position or postpone it.
The more knowledge you have, the safer it seems, but in the market it can become dangerous if you use it incorrectly. It is realistic to treat the evening star as a tool to pause before buying or selling, rather than as a word that forces you to make a hasty decision.