IdentificationAs it is a Bearish pattern and strong indicator of future price declines, you should look for it at the top of the graph or at uptrend. This pattern is compossed of 3 candles :
First one to be a long Bullish candle (green candle) . Second candle can exhibit any color but length of it's shadows should be approximately equal to each other(wick ≈ tail).This candle is also referred to as Star.and the Third candle is a long Bearish candle.
You have to notice some other things in an evening star like:
The whole star is above the first candle.The star(second candle) have to should open Gapped up or we can say that it should open above the first candle and also the closing point should also be above the closing point(remember that it's close point and not highest point) of first candle.
Third candle should Gap down open and have to close either near to center of first candle or near the open of first candle. also, the lowest point of third candle should always be greater than low point of first candle.
When you have some pattern and you think it to be an evening star , you can verify it by directly drawing the pattern on a page and than marking horizontal lines as shown in the figure below at points a,b,c & d.
If the resulatant formed by joining the lines as shown in the figure above, is a shooting star or a Gravestone doji with line from point b to be highest price and from point a to be representing lowest price, than it is an Evening star.
Working with EVENING STAREvening star is somewhat considered to be a reliable pattern, but it always better to use confirmation. When the candle next to the pattern or we can say the fourth candle comes below the lowest point of first candle, you can trade here and trading here means selling as evening star represents a bearish trend to follow .If you dont posses any stock at the moment, you can also earn by doing short selling
Coming to the Stop-loss, you can set it at the peak of the star (at point b).It would always be preferable if the volume is increasing with each candle in evening star.You are suggested to use RSI with Evening star and for more reliability , you can also use price oscillations, trendlines or some other technical indicator.