DT Doji Forex Trading Strategy

The DT Doji forex trading strategy adopts a single candlestick pattern in spotting trend reversals.

DT stands for Dragonfly/Tombstone, a candlestick pattern that represents bullish/bearish reversal respectively.

Locating this price action pattern at resistance (Tombstone) and support (Dragonfly) levels is crucial.

Chart Setup

MetaTrader4 Indicators: CUSIV01.ex4 (Input Variable modified; EMASize = 190), PivotWeekly.ex4 (default setting)

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, Day

Recommended Trading Sessions: Any

Currency Pairs: Any pair except exotics

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Buy Trade Example

Fig. 1.0

Strategy      

Long Entry Rules

Enter a buy order if the following indicator or chart pattern are on display:

  1. If the Dragonfly Doji forms around a support level as seen on the candlestick labelled 1 on Fig. 1.0, price is said to be pushed higher i.e. a trigger to buy the currency pair of focus.
  2. If the lime histograms of the CUSIV01 custom indicator forms above the 0.00 signal level as shown on the chart (refer to Fig. 1.0), price is said to be pressured upwards i.e. a signal to buy the instrument of focus.

Stop Loss for Buy Entry: Place stop loss 2-5 pips below the low of the Dragonfly Doji.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following rules or conditions are upheld on the activity chart:

  1. If a bullish reversal price action pattern forms around a strong resistance point, this could be a pointer towards a possible exit or take profit trigger (refer to Fig. 1.0).
  2. If a red histogram of the CUSIV01 custom indicator forms during a bullish trend, it is a signal to halting bullish pressures in the market, hence a trigger to exit or take profit without delay.

Sell Entry Rules

Initiate a sell entry if the following holds true on the activity chart:

  1. If the Tombstone Doji forms around a resistance level as seen on the candlestick labelled 1 on Fig. 1.1, price is said to be on its way down i.e. a trigger to sell the currency pair of focus.
  2. If the red histograms of the CUSIV01 custom indicator forms below the 0.00 signal level as shown on the chart (refer to Fig. 1.1), price is said to be pressured downwards i.e. a signal to sell the asset of interest.

Stop Loss for Sell Entry: Place stop loss 2-5 pips above the high of the Tombstone Doji.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following indicator or chart pattern gets displayed:

  1. If a bearish reversal price action pattern forms around a strong support level, this could be a pointer towards a possible exit or take profit trigger.
  2. If a lime histogram of the CUSIV01 custom indicator forms above the 0.00 level during a bearish trend, it is a signal to halting bearish pressures in the market, hence a trigger to exit or take profit straight away.

Sell Trade Example

Fig. 1.1

Free Download

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About The Trading Indicators

The CUSIV01.ex4 custom indicator is an oscillator that can be used to spot trend using its adjustable EMASize value default reading of 50.

It aligns red histogram (bearish) and lime histogram (bullish), below and above the 0.00 signal level respectively.

The PivotWeekly.ex4 custom indicator is a technical tool that is used to plot Fibonacci levels on the price chart, thereby allowing us view weekly support and resistance levels.

The Tombstone Doji and the Dragonfly Doji are both reversal patterns that appear at top or bottom of bullish or bearish market patterns respectively.

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