Double Doji Strategy (How To Trade)The Doji pattern is one of the most incredible patterns among the Japanese candlesticks. For some reason it is not referred to very often. Maybe that explains why is is extensively used by professionals, not retailers. Only trade this pattern during high liquidity and volume times of session.
The Doji hints us that the market is in a state of balance of powers: the buyers strength has run out, but so is the sellers. So this is a state of temporary calmness, just before a major move happens. Note: a hourly or higher candle with a body of under 5 pips is considered a Doji.
The Doji may appear in variety of shapes, but the meaning of all of them is the same. The meaning is that the opening and closing price of the candle are the same. Remember that each candle represents a certain amount of time. For example (attached noted chart) is looking at a 1 hour (H 1) chart, each candle represents one hour of market activity. NOTE: this Double Doji Strategy works better on higher time frames: 1 hour, 4 hour and daily. (FYI).
RULES:
1) Identify 2 Dojis one after the other. It is preferable that the two Dojis will appear after a clear strong trend, for example an up trend or a downtrend.
2) You should mark the high and low borders of the two Dojis (place lines). As you can see on attached chart, I've marked the upper and lower borders of those two Dojis. Once top or bottom border is crossed, a move is underway so it is time to make a trade.
3) Place 2 pending orders. One if market breaks upper border of Dojis (1 pip above is enough) and one if market breaks the lower border (1 pip below).
4) For a buy (long) trade, place stop loss 1 pip below the Dojis lower border. For a sell (short) trade, place stop loss 1 pip above the Dojis upper border.
Now for the cheerful part of determining the profit target, or the amount of profit you expect to extract from this trade: 3 different methods:
1) Take Profit is equal to the stop loss ( attached chart is example of this one)
2) You open 2 identical trades. The first has a stop loss equal to the take profit. The second has a profit target which is double the stop loss. For example: Stop Loss is 50 pips and Take Profit is 100 pips.
3) Open one trade with a profit target which is half the stop loss. Lets say I determined the stop loss to be 50 pips, thus the first target would be 25 pips. This is where I'll close 80% of the trade. The second profit target, would be x2 of the stop loss. Or this example, take profit would be 100 pips.
