The doji is a trading strategy that is under the umbrella of candlestick pattern. You can find doji usually on forex and the normal candlestick charts. The one dominant con of the double doji is that it is easy and can be authenticated easily, making it more credible and reliable for many traders as it gives you a high chance of getting the strategy right from the first time.
How is a doji normally used?
A doji is an indication of reversal of a trend, so seeing a trend then a doji means that there is a reversal of the trend on your way. A double doji is 2 or more dojis placed consequently to show a significance of a trend change when all of them appear.
When where and how to use the Doji?
Using the doji depends on the strategy setup of having a signal
bar and an entry bar to know your position. The signal bar is a one doji that
has the tallest tail on any uptrend or the lowest tail in any downtrend. On the
other hand, the entry bar is the bar responsible for breaking the tallest tail
in the uptrend or creating a breakout for the shortest tail in the downtrend.
The double doji doesn’t take a lot of profit as it targets 10 pips only as it
depends on EURUSD 70 tick chart. The stop loss option needs you to be alert;
however, nothing can be learned without a trial. So try and calibrate if you
want to do your trades with the stop loss.
Dragonfly doji – only a long shadow under the identical opening and closing price. Again may indicate trend reversal signal.
Ideal conditions of the DDB
- Tick charts help you scalp in the DDB just for 1 minute.
- Add your 20EMA line to the chart with exponential moving of 20 periods.
- DD is significant when there is good volume to be decisive, so add the volume indicator too.
- Trade a signal when you find a pullback after a trend. Thus, the trend will continue its path.
- Depend on support lines because there is no rounding numbers in DD.
- RSI oscillator indicator helps you determine the overbought and oversold conditions. Seeing the DD at this point means that you can trade now, it is perfect.
- After a long trend, the market slows and then the double doji break pattern appears.
- Technically the candle does not have to be a perfect doji, just a representation.
Here is a scenario of trading the Double Doji…
The 20EMA sets the zero line for all bars and you can identify an uptrend, so view the
pullback again to the 20EMA. Don’t be tempted to buy when the price touches the
EMA line. Just wait until the bar is above the EMA line. Then, form a Double
Doji and wait for the bar to go beyond the highest doji, then you can do your
What is the downside of this double doji strategy.
The double doji is spread everywhere as it holds low risk
probability and it became so common, so identifying the signal by the double
doji is burdensome. The better the setup and its visuals, the more you will be
aware of correct and wrong signals.