This is a forex strategy utilizing a doji star candle formation in a more complex solution. Under the right circumstances, doji star can be considered a micro breakout and therefore a good entry signal. Price tunnel in combination with historical average price can provide a further statistical edge for our entry. This forex approach was tested on historical data since 2003, with positive results.
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Strategy rules are provided together with free expert advisor suitable for testing this forex strategy and adjusting it for various timeframes and currency pairs in forex. It was tested on high quality historical data (1H, EURUSD tick) with positive results. Tests have also revealed that strategy can work with hundreds of profitable settings' variation.
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Forex strategy tools and indicators
Following setting have been used to achieve results provided in screenshots.
Moving average (EMA 600). EMA is used as a major trend filter. We will be looking to its position relative to Bollinger bands to determine the trend.
Bollinger bands (BB period 60, deviation 2). Indicator will create a price tunnel. Price traded above/ below the tunnel will trigger a search for a doji star formation that is our entry signal. Conservatively, price closing above/below BB tunnel is already considered a breakout in most of the cases. This will be already confirmed by EMA. Doji star will be considered to be a confirmation in least possible time interval of our chart.
Doji star (max body width 5 pips): Basic candle formation. Flat candle signalizing a trading range on lower time frames. Doji star reaction candle can be considered a breakout candle. If the doji breakout direction is the same as our BB breakout and major trend – this is a triple confirmation and we enter the trade.
Advanced Trailing stop (additional distance 70 pips). Each position must be protected by trailing stop. TS is adjusted after each candle close. Extra distance can be applied for modified results.
Max open trades (1): Strategy allows opening more than one trade at the same time. This also requires adjusting used lot size. Our tests were done for only 1 trade per direction opened at the same time.
Forex strategy rules
Upper BB line trending below EMA. Downtrend confirmed.
Price is closing below bottom BB. Downward momentum confirmed. Price must move rapidly to close below BB. This can be also considered to be a breakout in our time frame.
Doji star formation. Doji candle followed by bearish candle closing below the doji low.
This completes the formation and we will enter the trade short on new candle open. Trailing stop is placed above the high of signal candle (candle following the doji). Trailing stop will remain the only method of position liquidation in this forex strategy.
Bottom BB line trending above EMA. Uptrend confirmed.
Price is closing above upper BB. Upward momentum confirmed. Price must move rapidly to close above BB. This can be also considered to be a breakout in our time frame.
Doji star formation. Doji candle followed by bullish candle closing above the doji high.
This completes the formation and we will enter the trade long on new candle open. Trailing stop is placed below the low of signal candle (candle following the doji). Trailing stop will remain the only method of position liquidation in this forex strategy.
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Disclaimer: Expert advisor was tested for profitability on historical data. All screen shots provided are displaying real results of the test. However past data will never guarantee future success. Every expert advisor needs to be tested properly on demo account. LIVE use only on your own risk. Read full disclaimer. TheForexKings Team does not give any financial advice. TheForexKings does not take any responsibility for any user’s investments and investment decisions. All rights reserved. Strictly for personal use.