Japanese candlestick charts<\/a> is the Doji Tri-Star. This formation consists of three consecutive Dojis. It occurs during an uptrend or downtrend and may signal a bearish or bullish reversal. <\/p>\n\n\n\nBelow is an illustration of the Doji candlestick Tri-Star pattern.<\/p>\n\n\n\nHow to Trade the Doji Star Pattern?<\/h2>\n\n\n\n As with any candlestick pattern, there\u2019s a specific way to trade Doji stars. And, it\u2019s consistent regardless of whether you\u2019re studying currency, commodity, or stock price. Simply identify the market entry, locate stop losses, and set profit targets.<\/p>\n\n\n\n
1. Determining Market Entry<\/h3>\n\n\n\n The Doji star is a reversal indicator. So, it may be interpreted as either a buy or sell signal: <\/p>\n\n\n\n
\nIn uptrends<\/strong>, the Doji star is a bearish reversal indicator<\/strong> and identifies a shorting<\/strong> opportunity. To do so, a sell order is placed below the third candle\u2019s low.<\/li>\n\n\n\nIn downtrends<\/strong>, the Doji star is a bullish reversal indicator<\/strong> and identifies an opportunity to go long<\/strong>. To do so, a buy order is placed above the third candle\u2019s high.<\/li>\n<\/ul>\n\n\n\n2. Locating Stop Losses<\/h3>\n\n\n\n When trading the Doji star, stop losses may be used to close out a long or short position in the case the position goes against you:<\/p>\n\n\n\n
\nFor a bullish<\/strong> Doji star pattern, the stop loss is placed below<\/strong> the Doji (second candle).<\/li>\n\n\n\nFor a bearish<\/strong> Doji star pattern, the stop loss is placed above<\/strong> the Doji (second candle). <\/li>\n<\/ul>\n\n\n\n3. Setting profit targets<\/h3>\n\n\n\n Due to Doji stars being reversal indicators<\/strong>, the potential for significant profits does exist. Typically, forex risk vs. reward ratios of 1:2 or better are applied. Here\u2019s where profit targets are located for long and short positions:<\/p>\n\n\n\n\nFor a bullish<\/strong> Doji star, the profit target is placed above<\/strong> the third candle of the pattern.<\/li>\n\n\n\nFor a bearish<\/strong> Doji star, the profit target is placed below<\/strong> the third candle of the pattern.<\/li>\n<\/ul>\n\n\n\nLet’s see a trading example of the Doji star pattern<\/strong>:<\/p>\n\n\n\nUsing the Doji star to trade price trend reversals can be a profitable trading strategy. The GBP\/USD example below illustrates the trading functionality of this indicator.<\/p>\n\n\n\nThe aforementioned GBP\/USD trade was executed as follows:<\/p>\n\n\n\n
\nA pronounced uptrend was identified.<\/li>\n\n\n\n The bearish Doji star is set up on the 30-minute chart.<\/li>\n\n\n\n A sell order was placed at 1.3566, beneath the third candle of the pattern.<\/li>\n\n\n\n A stop loss was placed at 1.3589, above the Doji.<\/li>\n\n\n\n A profit target was placed at 1.3520, beneath the pattern according to a 1:2 risk vs. reward ratio.<\/li>\n\n\n\n Upon the trade going live, the profit target was reached for a gain of 46 pips.<\/li>\n<\/ol>\n\n\n\nThe Doji Star – Pros and Cons<\/h2>\n\n\n\n All chart patterns have a collection of pros and cons. Below are a few of the most important for the Doji star.<\/p>\n\n\n\n
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\n
Pros<\/p>\n
\nReadily identifiable<\/li>\n Occurs on all forex pairs on all time frames<\/li>\n Can generate significant profits by projecting market reversals<\/li>\n <\/ul>\n <\/div>\n
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\n Table of Contents<\/span>\n <\/div>\n ![\"doji](\"https:\/\/howtotrade.com\/wp-content\/uploads\/2022\/04\/doji-star-candlestick-pattern-forex-trading-1024x588.png\")
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