– A is usually part of common Japanese reversal patterns like the and patterns
– Because Dojis are found in a large number of reversal patterns, traders automatically think that the single is a reversal . But in fact, the by itself represents indecision in the marketplace.
– A breakout setup provides an excellent risk to reward opportunity for forex traders.
The lowly is very unassuming in appearance. Typically, it looks like a plus sign but can appear as a capital “T” in the Dragonfly pattern or the shape of a nail in the Gravestone . We are going to be discussing the first two types of dojis found in the “cheat sheet” above. These small candles can lead to large breakouts that either continue trends or reverses them. We are going to look at the way to trade these power packed price patterns with limited risk for maximum potential gain
Typical consist of a body that may be one of two colors; blue or red. A candle is blue if buyers were able to push prices above the opening price and were able to hold it until the close of the candle. A candle is red or is sellers were able to push prices below the opening price and hold it there until the close.
On the other hand, the candles have no color. The and long-legged illustrate the battle between buyers and sellers that ended in a tie. The opening price and closing price are in the same place as bulls were unable to close prices higher and bears were unable to close prices lower.
How to Trade the Breakout
Ideally, you want to find a that has formed near a level of support like a . You want to identify the high and the low as this will determine the levels of a potential breakout.