Double Doji Forex Breakout Trading Strategy

The double doji forex breakout trading strategy is an effective breakout strategy that is able to catch breakouts in the market notwithstanding the direction price takes.

The Doji as we know spells indecision in the market and to experience double consecutive dojis on the chart, it is a worthy indication that price is about to break in either direction.

This strategy with the help of the HMA_v2 and the Fisher_m11 custom indicator will capture the breakout.

Chart Setup

MetaTrader4 Indicators: HMA_v2 (default setting), Fisher_m11 (default setting)

Preferred Time Frame(s): 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours

Recommended Trading Sessions: Any

Currency Pairs: Any

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Buy Trade Example (Click the picture for full size view)

double-doji-forex-breakout-trading-strategy

Fig. 1.0

Strategy

Long Entry Rules

Enter a buy in the market if the following chart or indicator patterns are in display:

  1. If a double doji forms on the activity chart, market the high and low borders of the dojis and wait for the next candle to close. If the next candle closes above the upper border of the double doji, it is a trigger to buy.
  2. If the HMA_v2 custom indicator forms lightblue dots below price bars, it is an indication that price is in an upward trend.
  3. The Fisher_m11 custom indicator bars turns lime and are aligned above the 0.00 level, an indication that price is bullish.

Stop Loss for Buy Entry: Place stop loss below support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit on position(s) if the following conditions or rules holds sway:

  1. If a reversal price action pattern forms for instance a double doji with the third candle closing below the range of dojis (it is obviously a sell, hence an exit for all existing bullish orders). You can also check us out for more reversal price action patterns.
  2. As shown on Fig. 1.0, if a tomato colored dots of the HMA_v2 custom indicator forms above price bars, it is a trigger to exit or take profit.
  3. If the Fisher_m11 custom indicator bars reverses and forms red colored bars below the 0.00 level, it is a signal to exit or take profit.

Sell Entry Rules

Enter a sell if the conditions or rules are ripe in the market:

  1. If a double doji forms on the activity chart and the third candle closes below the lower border of the double doji, a sell is advised.
  2. If the HMA_v2 custom indicator forms tomato dots above price bars, it is an indication that price is in a downward spin.
  3. If the Fisher_m11 custom indicator bars turns red and is aligned below the 0.00 level, price is aid to be bearish.

Stop Loss for Sell Entry: Place stop loss above resistance.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following chart/indicator patterns takes precedence:

  1. If a reversal pattern is spotted while riding the prevailing trend, it is advisable to exit or take profit.
  2. If the HMA_v2 custom indicator forms light blue dots that are somewhat placed below the price bars, it is a trigger to exit or take profit.
  3. If the Fisher_m11 custom indicator forms a lime colored vertical bar, it is a sign that price is reversing upwards i.e. exit or take profit.

The chart on Fig. 1.1 doesn’t fit into our rule since the third candle that formed after the double doji did not close below the lower border of the double doji. Ensure that you only initiate an entry if the third candle closes below the lower border of the double doji (to satisfy a sell criteria).

double-doji-forex-breakout-trading-system

Fig. 1.1

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About The Trading Indicators

The HMA_v2 custom indicator is a dotted line indicator that changes the color of its dots to trigger buy or sell signals (light blue dots indicates a bullish sentiment while the tomato colored dots are suggestive of a sell signal).

The Fisher_m11 on the other hand is a simple histogram indicator that isolates strength and the course of the trend and alerts changes in trend. Its code is devoid of any typical MT4/MT5 indicator.

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