2 Doji Candlesticks Forex Breakout Strategy can be used when you notice two doji candlesticks form one after the other.
What Is The Double Doji Candlestick Pattern?
The meaning behind this pattern is that there is indecision between buyers and sellers, and a breakout is most likely imminent. At the time of the doji, neither the bulls or the bears have the upper hand. That will change depending on the direction of the breakout.
Is The 2 Doji Bullish Or Bearish?
The double doji pattern is a candlestick pattern in technical analysis that can be either bullish or bearish. The higher probability trade is dependent on the context they appear.
In general, a doji candlestick pattern forms when the opening and closing prices are the same or nearly the same, resulting in a small or non-existent body and long shadows. The double doji pattern occurs when two consecutive doji candles appear in a row.
If the double doji pattern appears after a downtrend, it may signal a potential bullish reversal, as it suggests that the bears have lost momentum and the bulls may be taking control.
However, if the double doji pattern appears after an uptrend, it may signal a potential bearish reversal, as it suggests that the bulls have lost momentum and the bears may be taking control.
What Is The 2 Doji Candlesticks Forex Breakout Strategy?
The 2 Doji Candlesticks Forex Breakout Strategy is a popular trading strategy used in the forex market. It involves identifying two consecutive doji candlesticks on a chart, which signifies that the market is indecisive about its direction. Traders then wait for a breakout to occur, either above or below the doji candles, as an indication of a potential trend reversal.
Since we don’t know the direction of the breakout, we will look to trade in either direction.
Timeframes: 4hr and daily
Currency Pairs: Any
Candlestick Pattern: Double Doji
Forex Indicators: None needed
TRADING RULES
- Watch until you spot 2 consecutive doji candlesticks on the charts
- Mark the high and low of the doji borders
- Wait for the third candlestick to close
- if the third candlestick closes above the upper border, buy at the market and place your stop loss 2-3 pips below the low that you marked in step 2 or you can place it 2-3 pips below the low of the third candlestick.
- if the third candlestick closes below the lower border then sell at the market and place your stop loss 2-3 pips above the high that your marked in step 2 or you can place it 2-3 pips above the high of the third candlestick.
- For your profit target, you can use previous swing highs for buy orders and swing lows for a sell order or you can target three times what you have risked on the trade
In this 2 doji trade, the target was 3 times the risk on the trade which is met at 345 pips. The previous swing high can be used as a target or an area where you apply money management.
ADVANTAGES OF THE 2 DOJI CANDLESTICKS FOREX TRADING STRATEGY
- Simple trading system based on price action
- Potential for explosive price moves that can get you hundreds of pips easily after the breakout.
- Risk to reward is good as most trades will get to at least 1:1
DISADVANTAGES
- Setup may not happen frequently so you may need to watch a lot of currency pairs to make sure you catch this trading setup happening.
- Trade may trigger in and the consolidation as shown by the doji candlesticks, will continue
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Editor note: The original appeared on Aug 2/2015. Updated Feb 22/2023