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Ultimate Morning Doji Star Guide For Best Results

Morning doji star is a three-candlestick bullish reversal pattern that frequently appears at the bottom of a downtrend.

However, the use of the morning doji candlestick pattern extends beyond that; you can see it in the scenarios below as well –

  • In an uptrend – for a bullish continuation
  • Bearish continuation in a downtrend
morning doji star candlestick

This pattern has proven to be especially useful when trading pullbacks in an uptrend, as we will see later.


Table of Contents


How to Recognize?

Allowing a pattern to fully develop is crucial. In the case of a doji star, this occurs when the third bullish candle closes above the doji’s body.

Use the table below to confirm the formation of the morning doji star –

Number of candles in formation Three
Prior TrendDowntrend
First CandleTall bearish candle
Second CandleDoji
Third CandleTall bullish candle

One frequently asked question is which doji appears to be appropriate for the pattern to be validated. 

The type of doji, in my opinion, is not particularly significant in this instance; this point will become clearer as we explore the psychology underlying the formation.

Example

example of morning star doji

The currency pair EUR/USD is used to illustrate the candlestick formation in the example above, which shows the pattern’s most frequent occurrence.

A downtrend attempting to recover with a small pullback earlier creates a support level, which is followed by the formation of a morning doji star and prices reverse from bearish to bullish trend.

If you look closely, you will notice that this is a double bottom reversal. Additionally, with so many confluence working together, this trade could have been a very good signal to trade with.

Morning Doji Star Psychology

Bears are in charge prior to the formation of the pattern. 

The downtrend receives another favorable bearish candle, this time as the first candle in formation, providing bears with additional confidence.

However, the next candle is all about the tug of war between the bulls and bears.

So it doesn’t matter if the second candle is a gravestone, a dragonfly, or a long legged doji – the important thing is that the price hasn’t moved.

At this point in the market, sellers are unsure about going further short, giving bulls an opportunity to take control. If the third candle opens above the body of the doji, the bullish momentum will begin.

If the third candle closes above the body of the second candle, no further confirmation is required, and the next candles have a 90% chance of reversing the trend.

Trading Strategy

The beauty of star patterns is that, unlike other reversal patterns, they can be traded in a variety of ways, as we will see in this section.

Although there are numerous ways to trade the doji morning star, we will focus on two of the most dependable and profitable methods:

1. In an upward trend

When a pattern appears in an ongoing uptrend, there are opportunities during pullbacks, and it is also one of my favorite trading methods.

An example of how to trade a morning doji star in an uptrend is shown below-

morning star doji pullback with trendlines
  1. The first step is to use trendlines to identify an uptrend.

  1. Wait for retest to trendline dynamic support level.

  1. Keep an eye on the price action near the trendline support. 

  1. If you see a morning doji star candlestick, it is time to act.

  1. After the third candle has closed above the doji, enter a long position. 

  1. If a gap up opening appears, you can increase the position size because it is the most reliable formation.

2. In a downtrend

During a downtrend, the pattern can be traded as a bullish reversal or a bearish continuation.

If prices breakout downwards rather than reversing after the formation, it is a bearish continuation signal and should be traded accordingly; professional traders understand how to capitalize on such developments, and you can also trade in the direction of the major trend rather than thinking about why the pattern failed.

Now, for the second scenario, where prices breakout with good volume above the pattern formation, there is a method that is more reliable than simply jumping into the trade, which we will demonstrate with an example –

morning star doji in downtrend

As demonstrated in the preceding example, there is a very important logic to understand why one should wait for a retracement rather than simply entering a trade in anticipation of a bullish reversal. When the market is in a downtrend (especially for an extended period of time), prices may come to retest before eventually moving higher.

New traders make this mistake and become victims of stop loss hunting.

To avoid making such a mistake, use a fibonacci retracement level in conjunction with price action to confirm a bullish reversal, as shown in the example above.

After the morning doji star formation prices did move high and retraced upto 50% fibonacci level before eventually moving high with strong bullish momentum.

Morning Doji Star vs. Morning Star

As shown in the image, the morning doji star candlestick pattern has a doji (of any kind) as the second candlestick of the pattern formation, whereas the morning star can have any candlestick as long as its body is below the other two candles.

In terms of trading statistics and trading tactics, there isn’t much of a difference, but in a bear market, the performance of the morning doji star candlestick outperforms the morning star.

Tips for Trading Morning doji Star

  1. Confirm the pattern formation before placing any trade.

  1. Morning doji star is a standout performer in candlestick patterns; simply combine it with other price action techniques for the best results.

  1. Patterns with long and tall candles adjacent to doji perform well; consider including them on your list.

  1. If volume drops during pattern formation, it is a good indication that a valid pattern is in place.

  1. While breakout with high volume is also a great indicator of bullish reversal.

  1. If the third candle (bullish one) opens with a large gap and the gap does not close in the next two or three candles, there is a 93% chance that the price will move higher, indicating a bullish reversal.

  1. It is preferable to include morning star doji in your trading setup rather than trading them separately (though there is no harm in doing so as well). The reason is simple: there aren’t a lot of morning doji star occurrences.

Summary

  • Morning doji star is a three-candle pattern that indicates a bullish trend reversal.

  • A valid pattern has a success rate of 80% – 90%, especially when prices are close to or above the pattern. 

  • This pattern can be traded in bull markets, bear markets, uptrends, and downtrends, making it one of the most versatile patterns.

  • Tall pattern performs well.

  • The only difference between morning star and morning doji star is the doji itself.

  • Trading with fibonacci retracements during an uptrend while the pattern forms during a retest of a trendline is a very reliable trend following strategy.

Author is Senior Technical Analyst
At Bulls Arena Trading
info@bullsarenatrading
New Delhi
India

What does morning doji star means ?

The presence of a morning doji star suggests the possibility of a bullish reversal.

Is morning doji star bullish ?

If a pattern forms during a downtrend, a price breakout above the pattern may be a bullish signal.

How reliable is Morning Star candlestick pattern?

A valid morning star candlestick pattern with prices closing above the pattern has a 93% chance of causing the price to move higher.

Author

  • RUPIN JOSHI

    Rupin Joshi Senior Technical Analyst, Finance Writer, and Trading ExpertRupin Joshi is a seasoned Trading Expert with over a decade of experience. As a prolific Finance Writer, he has authored numerous research papers in Technical Analysis and Price Action. Rupin's insights and strategies have earned him global recognition, including awards in Trading Competitions. Currently serving as the Director at Bulls Arena Trading, he continues to empower traders and investors with his expertise and innovative approaches.