Morning Doji Star
Type : Reversal
Direction : Bullish
Prior Trend : Bearish
Reliability : High
Morning Doji Star pattern consists of three candlesticks. This is a bullish reversal pattern which occurs in a down trend. This is an highly reliable candlestick pattern if it is combined with other indicators like Bollinger Bands, CCI, Stochastics etc. This pattern consists of of a bearish candlestick in a downtrend followed by a doji followed by a bullish candlestick.
How to recognize morning doji stars:
1) The market is in a downtrend.
2) A bearish candlestick forms.
3) After the bearish candlestick a doji forms.
4) A bullish candlestick appears after the doji.
Important Factors:
1) It is always important to wait for the third candlestick after the doji is formed and confirm that it is a bullish candlestick.
2) As a doji means the open and close prices are same, it is very very rare that you will see a real doji formation in forex. But if the candlestick visually appears like the open and close prices are same, I consider it as a doji.
3) Morning doji stars are very powerful if they are combined with other indicators like bollinger bands, CCI or stochastics. So always use morning doji stars with other indicators to confirm the reversal.
The following are some of the real time examples of morning doji stars:
GBPCAD Hourly Chart Morning Doji Star:
GBPCAD Morning Doji Star
USDJPY Four Hour Chart Morning Doji Stars:
USDJPY Morning Doji Stars
How to trade morning doji stars:
As I mentioned above morning doji stars work very good with other indicators. The following are some of the examples of how you can use morning doji stars.
1) If the market is in a range bound market where the bollinger bands are parallel and if a morning doji star is formed at the bottom of the bollinger bands it’s a good entry for a long trade. The following is the GBPCAD hourly chart, which I have shown above but with the indicators bollinger bands, CCI and Stochastics. If you observe the maket, it is in a range bound market. If you observe the morning doji star, the doji has formed completely outside of the bollinger bands. Moreover CCI is below -100 and stochastics has touched the -20 line. After the bullish candlestick completed after the doji, the stochastics moving averages crossed each other. So it’s a good opportunity to enter a long trade.
GBPCAD Morning Doji Star Trading
2) If the market is in a trend retracements are very common. If the trend is an uptrend and if in the retracements a morning doji star is formed it’s a good opportunity to enter long trades in the direction of trend. Check the following example. The following is the USDJPY four hour chart. If you check the chart you can see that it’s in an uptrend and you can see the retracements. In the retracements the morning doji stars are formed and the market started following the trend. So these are good points to enter the trend.
USDJPY Morning Doji Stars Trading
3) Trend lines are one of the important trading techniques of many forex traders. Once a trend line is broken in many cases the price reverses back to the trend line. For example the following is the USDCAD hourly chart and I have drawn a trend line which is a resistance line. The resistance trend line is broken at some point and you can see that the price returned back to the trend line. Now the resistance trend line acted as a support trend line and a morning doji star is formed at this point and you can see that the price bumped up almost 200 pips. So when a trend line is broken the the price returned back and if a morning doji star is formed at the trend line it’s a good opportunity to enter a long trade.
USDCAD Morning Doji Star
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