When three Doji candlesticks appear in succession, it creates a reversal pattern known as the “Tri-Star Candlestick Pattern,” which may be bullish or bearish depending on the context. The Doji is an indecisive or trend-reversal candlestick pattern. Because the opening and closing prices of the candle are close to each other, this pattern has a small body and long wicks at the top and bottom.
Traders are advised not to use the Tri-Star candlestick pattern as a standalone reversal strategy. Instead, they should use other technical analysis methods or indicators to confirm the signal. Read on for a description of the Tri-Star Candlestick pattern and several trading strategies based on it.
What is a Tri-star Candlestick Pattern
The tri-star candlestick pattern is a three-candle bullish or bearish reversal pattern that appears at the end of a trend. When three Doji candlesticks appears in a row at the end of a prolonged trend, this pattern is formed. The first Doji shows uncertainty between buyers and sellers; the second Doji gaps in the trend direction; and the third Doji alters market sentiment when the candlestick opens against the trend. Each doji’s fairly thin shadow wick indicates a temporary drop in volatility.
Tri-star Candlestick Pattern Strategy
If three small bullish candlesticks form in succession, each with a small body and a lengthy upper wick, this is a bullish tri-star candlestick pattern, which may be used as a trading signal. This pattern signals a potential reversal in the market, with buyers becoming more active and driving prices upward.
To use this strategy, traders must first wait for the Tristar- Candlestick Pattern to appear. Once it does, they should wait until the market breaks above the high of the third candlestick before opening a long position. You may protect your capital by setting a stop-loss order below the low of the third candlestick.
On the other hand, the bearish tri-star candlestick pattern method involves looking for a series of three small bearish candlesticks, each with a small body and a long lower wick. This trend could mean that the market is about to change, with sellers becoming more active and prices going down.
To implement this strategy, traders should wait for the tri-star candle pattern to emerge and then short the market when it breaks below the bottom of the third candlestick. Traders may set a stop-loss order high above the third candlestick to protect against further losses. Traders should use other technical analysis methods or indicators in conjunction with the tri-star candlestick pattern before placing a trade.
- Look for instances in which tristar appears after a prolonged downtrend.
- You may place buy orders when the market price breaks above the high of the third candle, or when the market produces a higher low after the Tri-Star candlestick pattern.
- Place a stop loss slightly below the bottom of the third candlestick to reduce potential losses.
- Look for instances in which tristar appears after a prolonged uptrend.
- You may place sell orders when the market price breaks below the low of the third candle, or when the market produces a lower high after a Tri-Star candlestick pattern.
- Place a stop loss slightly above the top of the third candlestick to reduce potential losses.
Tristar – Candlestick Pattern Pros & Cons
- It indicates a trend reversal
- It can be easily identified on a chart, making it accessible to traders of all experience levels.
- It indicates a potential trend reversal when used In combination with other technical analysis tools and indicators, such as support and resistance levels.
- It is not a standalone strategy for a trend reversal.
- It can be deceptive in some market conditions, such as a flat or ranging market.
- It is a rare pattern and should be combined with other indications and technical analysis.
In conclusion, traders may use the Tri-Star Candlestick Pattern as a bullish or bearish reversal pattern to decide whether or not to enter a trade. A three-candle pattern occurs when three Doji candlesticks appear in a row. When a candle’s open and close prices are very close to one another, it forms a Doji candlestick, defined by a small real body and lengthy upper and lower wicks. It can signal indecision or a potential reversal in the market’s trend.
If the bears are losing ground and the bulls are gaining ground, as the Tristar- Candlestick Pattern indicates, we may see a reversal to the upside. Because the Tristar- Candlestick Pattern is rare, it is best to use it along with other indicators and analyses and to think about the overall market trend and the currency pairs movement before making a trade.
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