Forex Doji


Our forex H4 trading system combines some high probability setups that we’ve found work best on the 4-hour time frame. Learn the H4 forex trading strategy a cash-rich system to benefit from both the intraday price fluctuations and the larger time frames. Throughout this guide, we’ll outline a detailed plan around the best H4 forex strategy and what are the best trading tactics to implement on the 4-hour chart.


  • On the other hand, if a full-bodied candle closes above the doji high, enter long at the close of the candle and place a stop 4 pips below the low of the doji.
  • The appearance of a dragonfly doji after a price advance warns of a potential price decline.
  • It is perhaps more useful to think of both patterns as visual representations of uncertainty rather than pure bearish or bullish signals.
  • The open and close of the candlestick must be at the same price level so that the Doji either lacks a body or has a very tiny body.
  • The optimism of the previous period has been dashed, hence the ‘dark cloud’ of the name.

It will draw a green bar underneath the main chart when a Doji candlestick pattern has been identified. The appearance of a dragonfly doji after a price advance warns of a potential price decline. The open, high, and close prices match each other, and the low of the period is significantly lower than the former three. The content on this website is provided for informational purposes only and isn’t intended to constitute professional financial advice.

In the market but can also be an indication of slowing momentum of an existing trend. In order for the price to continue rising, more buyers are needed but there aren’t any more! Sellers are licking their chops and are looking to come in and drive the price back down.

Example 2: Doji candlestick formation – 4hr USD/CHF chart

What we look after is for the price to break above the 50 MA either within the first candles after we entered the market or during the development of the Doji Sandwich pattern. The chart above shows the Doji Sandwich pattern being printed well below the 200 MA in which case we’re going to treat this trade as a short-term trading opportunity. For example, if we have a bullish Doji sandwich pattern but well under the 200 MA, we’re going to treat this trade as a short to medium-term trade. However, if the pattern develops above the 200 MA, we want to stay with the trend and ride that wave to squeeze as much profit as possible.

Keep in mind that the higher trades will be those that are taken in the direction of the longer-term trends. In case of an uptrend, the stop would go below the lower wick of the Doji and in a downtrend the stop would go above the upper wick. Dojis are formed when the price of a currency pair opens and closes at virtually the same level within the timeframe of the chart on which the Doji occurs. Where the chart is now we can see that it’s undecided and now a trader has to wait for a break to either the upside or the downside. If you’re long, you’d do well to stay in the trade until opposite signals are given.

If you spot a long-legged doji with a slightly wider body, you have aspinning top. If you spot a long-legged doji with a slightly wider body, you have a spinning top. It isn’t hard to see why – with both patterns, the resulting move is well underway by the time the pattern completes.

The Dragonfly Doji can appear at either the top of an uptrend or the bottom of a downtrend and signals the potential for a change in direction. There is no line above the horizontal bar which creates a ‘T’ shape and signifies that prices did not move above the opening price. A very extended lower wick on this Doji at the bottom of a bearish move is a very bullish signal. As we know by now, the Doji star or traditional Doji pattern represents indecision in the market.

What Is a Doji Candle Pattern, and What Does It Tell You?

The double doji pattern is formed when two consecutive doji candlesticks appear within the same price range, as seen in the image above. A doji candle is characterized as opening and closing at or near the same price level, creating a “cross” shape on a chart. This indicates that buyers and sellers are essentially in balance; therefore, no clear direction of the market can be ascertained from this single candle alone.

reversal pattern

The long-legged doji is a candlestick that consists of long upper and lower shadows and has approximately the same opening and closing price. This doji is a bearish pattern that suggests a reversal followed by a downtrend in the price action. The Doji Arrows Indicator for MT4 plots a red arrow above a candle means it’s time to look for a short opportunity following the bearish Doji. The dragonfly doji is not a common occurrence, therefore, it is not a reliable tool for spotting most price reversals. There is no assurance the price will continue in the expected direction following the confirmation candle. The candle following a potentially bearish dragonfly needs to confirm the reversal.

Why the 4 Hour Time Frame is Important

Remember to wait for confirmation before trading a bearish pattern. In the rising three methods, a long green stick is followed by three smaller red ones. The three red sessions must all fall within the open and close range of the first candle. Then, a final green candlestick takes the market back above the first candle’s close. However, the sellers couldn’t resume the downtrend – a sign that momentum may be about to change. Because sellers pushed its price down to new lows during the session but couldn’t keep it there.

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One key aspect of successful that will help to determine the quality and probability of a trade is the risk vs. reward ratio. In my opinion, this is without question the single most important factor of a high quality trade. The size of each stop or limit order is based on the size of the entry order, or what is referred to as the traders open position.

Doji Star

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Spot Gold and Silver contracts are not subject to regulation under the U.S. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries.


The shadow in a candlestick chart is the thin part showing the price action for the day as it differs from high to low prices. The dragonfly doji is a candlestick pattern stock that traders analyze as a signal that a potential reversal in a security’s price is about to occur. Depending on past price action, this reversal could be to the downside or the upside. The dragonfly doji forms when the stock’s open, close, and high prices are equal.

A pinbar is triggered on the next, IF price can follow through and make a new low or high, depending on the pinbar. …most pinbars actually don’t get triggered and those untriggered pinbars are what causes losses in trading. The amateur traders jump on every signal that they can find and are usually always too early in the market. Just because you can spot a pinbar, it doesn’t mean that it’s a reason to get into a trade. Trading doesn’t have to be complicated but blindly just trading pinbars certainly won’t cut it.

For an in-depth explanation read our guide to the different Types of Doji Candlesticks. A single evening Doji star cannot reverse the whole trend of the market. So, to make it a powerful candlestick pattern, you will have to add other technical confluences, for example, resistance or supply zone. Although reliability increases with volume and a confirming candle, the gravestone doji is best accompanied by other technical tools to guide trading. Another alternative option is horizontal support and resistance.


During a corrective phase, as in our example, price will often find resistance at an important Fibonacci level. The word “doji” means blunder or mistake in Japanese, which refers to the rarity of a candlestick having the exact same opening and closing price. Unlike some other patterns, doji can’t typically tell you where to place your stop loss. Instead, the general rule of thumb is to find a nearby level of support or resistance and put your stop loss just beyond it.

Unlike the gravestone doji, the dragonfly doji pattern has a long lower shadow. This implies aggressive selling during the period of the candle. As noted above, a gravestone doji is used in technical analysis. They rely on statistical trends, such as past performance, price history, and trading volume to make their trading decisions. They often employ charts and other tools to identify opportunities in the market.

If a market rallies but then tapers off, a technical trader would see it as likely that another reversal may be on the cards. The best strategy is to monitor several triggers when you create a trade. For example, change in Volume, important economic news, critical support, or resistance level touch can be excellent triggers with a Doji pattern combination. Below, you will find a couple of methods to help you spot the best doji forex patterns that may lead to the highest probability reversals. Four-price doji, on the other hand, may be a sign that liquidity is low.

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Gravestone doji indicate that buyers initially pushed prices higher, but by the end of the session sellers take control driving prices back down to the session low. Dragonfly doji indicate that sellers initially drove prices higher, but by the end of the session buyers take control driving prices back up to the session high. Doji may also help confirm, or strengthen, other reversal indicators especially when found at support or resistance, after long trend or wide-ranging candlestick. SMART Signals scan the markets for opportunities so you don’t have to.

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