We use various analysis techniques when trading in financial markets. One of these techniques is candlestick analysis. Japanese candlestick patterns are easy-to-understand charts that play an important role in technical analysis. It is necessary to understand these candlestick patterns correctly for successful trading. In this article, we will take a brief look at the "Evening Doji Star" formation, one of the various patterns in candlestick analysis.
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| Evening Doji Star Candlestick Pattern |
- Topic: Evening Doji Star
- Type: bearish
- Trend direction: reversal
- Opposite pattern: Morning Doji Star
How did the name "Evening Doji Star"
candlestick pattern come about?
The name "Evening Doji Star" originates from the
appearance of the candlesticks that form the pattern. This pattern indicates
the end of an uptrend and the beginning of a downtrend. The Doji candlestick in
the structure of the pattern represents indecision and uncertainty. In other
words, the uptrend (morning) is coming to an end. The Doji candle forms a star
shape and is likened to a star seen in the evening sky. In this case, it
represents the end of the day and the beginning of darkness (the downtrend). Symbolically,
the name "Evening Doji Star" pattern is given based on this concept.
The Evening Doji Star is a candlestick pattern that is known to appear at the
end of an uptrend and indicates the possibility of a market reversal.
Formation of the "Evening Doji Star"
candlestick pattern
When the Evening Doji Star candlestick pattern appears on a
chart, it is thought that a move in the opposite direction may begin.
Candlesticks visually represent price movements and the psychology behind them.
The Evening Doji Star pattern consists of three candlesticks:
Long Bullish Candle: The first candlestick is a long-bodied
green (or white) candle. This bullish candle is usually formed as a short wick
candle.
Doji Star Candle: After the first candle, a doji candlestick
resembling a star is formed. This doji star candle typically occurs right after
the first candle, rarely it can also be seen after a gap above the first
candle.
Long Bearish Candle: The third candlestick that completes
the pattern is a bearish red (or black) candlestick pointing downwards.
The formation of this pattern indicates a high probability
of an upward trend ending and increases the chances of a downward movement
occurring.
Trading with "Evening Doji Star" candlestick
pattern
In financial markets, the Evening Doji Star candlestick
pattern is commonly used to predict trend reversals. This pattern, by
indicating that the market may move downwards, can create incredible selling
opportunities. However, before using this pattern, it is crucial to combine it
with other technical analysis tools and confirm trend changes. The most
important step after the formation of the Evening Doji Star pattern is to wait
for confirmation. Waiting for a while can increase the accuracy and reliability
of the pattern. If the pattern appears at critical points such as overbought
zones or resistance levels and is confirmed by moving averages, the likelihood
of a more reliable trading outcome increases.
Selling: When the pattern is complete, i.e., when the
closing price of the third candle (red candle) is below, we can consider taking
a short position.
Stop Loss: We can place a stop loss order above the highest
price of the Doji Star candle.
Target: It is common practice to use target-setting tools
such as Fibonacci retracement levels and risk-reward ratios when selecting a
profit point.
In the chart below, you can see how a profitable selling
opportunity can be captured in the Australian Dollar/Japanese Yen currency pair
thanks to the Evening Doji Star formation:
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| Evening Doji Star signals AUD/JPY reversal. |
It's pertinent to mention that: Trading in financial markets based on a single candlestick pattern is risky. The "Evening Doji Star" pattern is not a reliable method for predicting the market with certainty and can give false signals. Therefore, do your own research, follow risk management rules, and validate before opening a trade. Success in Forex trading requires experience and practice. Start with small amounts to see how the pattern works in real market conditions and develop your strategy over time.