Hello dear readers, how is your financial trading going? Every day, millions of traders are grappling with fluctuating prices and variable market conditions in financial markets. Here, knowledge and understanding are the keys to success. We strive to contribute to your trading endeavors in a meaningful way. Hopefully, our articles will be beneficial to you. Now you know that candlestick analysis is one of the most important tools in technical analysis. By reading candlestick patterns, we can understand market behaviors. In this article, we will take a look at the "Morning Doji Star" pattern.
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| The Morning Doji Star |
- Topic: Morning Doji Star
- Type: bullish
- Trend direction: reversal
- Opposite pattern: Evening Doji Star
What is the Morning Doji Star candlestick pattern?
The Morning Doji Star is a bullish reversal
pattern in Japanese candlestick analysis. This pattern appears at the end of a
downtrend and signals the beginning of an uptrend. The Morning Doji Star
pattern is known as a three-candlestick reversal formation. When observed in
charts, the Morning Doji Star candlestick pattern plays a critical role in
identifying turning points in the markets.
Why is it called Morning Doji Star?
The "Morning Doji Star" pattern is named so
because it usually signifies the beginning of a new day (i.e., an uptrend)
after a night's (or a downtrend's) end. The "doji" candlestick formed
at the end of the downtrend represents indecision and weakening of the trend.
This doji candlestick resembles a morning star, where darkness (the downtrend)
ends and brightness (the uptrend) begins. Thus, the name "Morning Doji
Star" is based on the appearance of its candlesticks and carries a
symbolic meaning.
How does the Morning Doji Star pattern form?
The Morning Doji Star is one of the formations that consists of three candlesticks in Japanese candlestick analysis. This candlestick formation usually occurs at the end of a downtrend. The candlesticks involved in the Morning Doji Star candlestick pattern are listed below:
The first candlestick: It appears at the end of a downtrend
and has a long black (or red) body.
The second candlestick: This candlestick emerges as a doji
that resembles a star due to the minimal difference between its opening and
closing prices. In some cases, there is a downward gap after the first candle
(bearish candle), followed by the formation of a star doji.
The third candlestick: This candle opens above the closing
price of the doji candle. Occasionally, there may also be a gap above the doji.
This bullish candle, which initiates the uptrend, is usually seen in green.
The Morning Doji Star is known as a reversal pattern. It
occurs when a downtrend is weakening and gives hope to the buyers. Then, the
market situation changes rapidly and an uptrend begins.
How to use the Morning Doji Star pattern in trading?
The Morning Doji Star pattern is one of the favorite
patterns among traders. It brings hope for prices to rise as the downtrend
weakens. No one wants to miss this opportunity. However, it is still essential
to verify before trading. We should evaluate the pattern considering the
strength of the current trend. In a strong downtrend, the reliability of
reversal patterns may decrease. Like any other candlestick pattern, we can open
a trade after confirming with other tools.
- Entry: It may be more suitable to place an entry order above the closing of the third candle of the Morning Doji Star pattern.
- Stop-Loss: The stop loss order can be placed below the lowest level of the doji star candle.
- Target: The profit target can be determined based on each trader's risk-reward ratio expectations.
Here is an example of trading with the Morning Doji Star
candlestick formation on the 4-hour chart of the New Zealand Dollar/Canadian
Dollar currency pair:
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| Morning Doji Star signals bullish reversal on NZD/CAD. |
It's worth noting: It's not guaranteed that every trade order we place in the Forex market will end in profit. Alongside gains, losses can also occur while trading. It's important to consider this risk. The Morning Doji Star candlestick pattern, like all other patterns, doesn't always provide a correct signal. Using it in conjunction with other technical indicators may be a more sensible strategy.