What Is The Evening Doji Star And How It Works?

There are many chart patterns you can look out for when it comes to trading. This doesn’t just apply to one area of trading either. You can look for chart patterns like the evening Doji star forming and developing across all asset classes.

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Introduction

There are many chart patterns you can look out for when it comes to trading. This doesn’t just apply to one area of trading either. You can look for chart patterns like the evening Doji star forming and developing across all asset classes. Be it forex trading, cryptocurrency trading or stocks or commodities. The beauty of identifying patterns centres around the fact that they can appear in any asset’s charts.

You might be curious about the Doji Star pattern’s origins and where the definition originally stems from. Although there are plenty of different chart patterns, a few have their origins in Japan. This includes other patterns, such as the Japanese candlestick and the Gravestone Doji

The translation of the word Doji means “the same thing”. It can sometimes be incorrectly identified as a stagnant period in the asset’s timeline. However, traders and analysts know that when this rare formation appears, it is likely that the price will drop. It is considered a bearish pattern. Buddhism is one of the most widely practised faiths in Japan. It contains several teachings and readings pertaining to this way of life, and Doji is a word borrowed to identify when this star pattern forms.

This is the perfect word for this pattern, as the main indicator revolves around the market opening and closing at the same level. This is why some traders mistake it for a period of consolidation, which can be a dangerous but easy mistake to make, given how rare it is for these patterns to form.

The most common market you will find an evening star Doji is usually in foreign exchange markets. However, you will likely come across them infrequently in other types of trading based on historical data. As well as featuring more often in foreign currency exchange charts, you can find more information on our insights page about other forex patterns, such as how to trade triangle patterns.

The key thing to take away from this pattern is that the consolidation isn’t down to the price settling and people sitting on their assets. It’s stability, usually before a sell-off occurs. This stagnation represents a period of uncertainty and anxiety before traders begin to sell the asset.

The Japanese candlestick and Gravestone Doji are rare formations on a chart, as is the evening Doji star. Today we will explore what the evening Doji star consists of. We will show you how to identify the indicators too. We will also cover what it means if you notice one on the chart of your chosen asset.

In addition, you’ll find an explanation of what we mean by a bearish indicator. Still, if you are looking out for an evening Doji star pattern, you may also hear it referred to as a Doji evening star or evening star Doji. However, they both refer to the same pattern, which we will explore today in greater detail. We will explain how it looks on a chart, so you know what to look out for and how it visually takes shape.

Firstly, we must ensure you know what we mean when we say Doji star bearish pattern. Bearish Doji stars indicate that the market is due to fall. A Doji star pattern is a price action that forms at the top of a period of upward growth before correcting at a much lower price differential. Whenever you hear of a bearish trend or a bearish pattern, this means that the price of the asset is due to decrease further. 

For many traders, the news of a bearish pattern is a good sign. It can allow them to execute strategies such as:

  • Selling their asset and buying back at a lower price. 
  • They can also continue to buy their asset at cheaper prices on the way down. This is a risk management tool known as dollar cost averaging. Whilst this is risky, if the trader believes in the asset’s quality, then they can purchase more at a better price.

In today’s market, dollar cost averaging is an effective tool that allows you to hold more of your chosen asset at a cheaper price while mitigating risk. Another effective way to manage your risk is to employ a strategy that minimizes trading on emotion.

So What Does A Bearish Doji Star Look Like On A Chart?

It is crucial that you know what to look out for when it comes to this type of pattern. A morning star pattern is the opposite of an evening Doji star pattern and indicates that the asset is due to break out to a higher level at some stage. A Doji morning star is a bullish Doji star, the opposite of the evening Doji star we have already discussed.


The evening star is the opposite of the morning star pattern. The two are bearish and bullish indicators, respectively. Doji stars can form at any given time, but certain variables characterize the fact that one has formed. They’re as follows:

  • As we discussed in the opening section, the first candle must move upwards considerably.
  • The next candle is a Doji that moves up by a positive but incremental amount.
  • We begin to see the reversal in the third candle as the price action wipes out at least half of the upwards price action from the initial candle.
  • This price movement must occur in this order for the pattern to be considered an evening Doji star.

What Does A Doji Star Bullish Look Like?

If you imagine the three-bar pattern we have discussed but imagine them going in the opposite direction, you would have an example of a morning Doji star candlestick pattern. The morning Doji star is a bullish indicator. Its first candle moves in a considerable negative direction, and the next two bars work in an opposite manner, too, essentially the evening Doji star opening candle. 

The following candle is a gradual Doji moving in a negative direction. As we touched on earlier in the article, if you are looking to set up automatic buy and sell orders, it is essential to use take profit and stop losses too.

 If you identify this pattern correctly, the next trend is a bullish breakout which could result in serious gains. The third and final bar pattern solidifies this movement and pushes the price toward a breakout, and it eats up the loss of the initial candle and moves into a positive range.

Whilst there is some debate amongst certain traders who believe these star Doji patterns mean a guaranteed breakout, there is also data to suggest it could signal volatility. In the spirit of impartiality, the two aren’t mutually exclusive. A morning Doji star is a large movement upwards, and an evening Doji star is a similar pattern downwards. 

Both of these patterns are Doji stars, and they’re also very volatile. So it is important that you conduct as much market research and chart analysis so that you can ensure you have no issues when identifying one.

How To Trade A Bearish Doji Star

Much like any investment, you must ensure you are performing due diligence and ample market research before entering a trade. Even with the best will in the world and good market knowledge, you can still stand to lose money. This is because your capital is always at risk, and the markets are extremely unpredictable. If somebody tells you they have a foolproof strategy guaranteed to make money, they are not telling the truth. 

Even Warren Buffett doesn’t know which way the market is heading. He undertakes extremely thorough research before entering any market and strictly doesn’t trade assets or stocks that he doesn’t understand. This is also a crucial point and should go without saying, but ensure you understand the nature of the asset you invest in.

For example, cryptocurrency is considered the most volatile asset class you can trade on the market today. You can employ some of the same strategies in other trading, such as automated trading. Much like a number of other chart patterns you could come across, crypto traders would be best to give this one a wide berth. 

Due to the high volatility and low levels of liquidity, this can inflame an already volatile market. Although they occur in certain cryptocurrency assets, they are more likely to appear in foreign exchange markets. Despite being rare occurrences in most types of assets, the evening star pattern is a technical indicator that signifies reliability for traders. The more experienced traders will use this pattern to their advantage if they are to make money from this particular formation.

However, there are specific variables that make cryptocurrency more unique to trade, as well as much riskier. If you want more information, you can set up crypto trading bots. You can take a look at our article on the topic, which goes into greater detail. 

However, it would be best if you were extra careful when trading cryptocurrency. Unlike markets such as forex, liquidity may not always be available in times of high market volatility.

Not even experienced professional traders know which direction the market will head for definite. They will conduct thorough research by checking multiple sources. In addition to this, they will also study charts and use the analysis to try and compile a strategy that fits in with their trading psychology. It is necessary to perform all of these tasks before a trade. By doing so, they are ensuring they give themselves the best chance of making a profit.

Trader sat at his trading desk with multiple screens open

But as we have pointed out, even with all of these measures in place, there is still a decent possibility that they could lose money on the trade. Your capital is always at risk when you invest. You should only invest in markets you understand and with money you can afford to lose.

We have touched on this several times in this piece; anyone looking to enter the market needs to understand the importance of sticking to your initial buying and selling price so that you can trust your own strategy.

As a beginner, trading an evening Doji star pattern is a difficult chart pattern to attempt if you’re in your early days of trading. It is recommended that you take a look at some simpler strategies. Once you have got to know the market, you can study more complex chart analysis patterns. 

You can use demo software or study historical chart information to try and identify different patterns. If you can master this type of study, you can then look to implement strategies that involve more sophisticated techniques.

Conclusion

Hopefully, you now understand what to look for when spotting an evening Doji star pattern. The key thing to remember is that it is a three-bar pattern with three specific characteristics. 

It is defined as a large bullish candle, a short upwards candle, and then a sharp correction. The correction results in a large portion of the initial candle being taken up.

There are plenty of pieces on the internet that will try and overcomplicate this type of article. We aren’t saying you should go out there and immediately attempt to find an evening Doji star pattern. However, it would be advantageous if you could build a picture of what chart patterns to look out for and what ones signal bearish and bullish intent.

Chart analysis is a pivotal tool that all traders use, and if you’re able to study how they work and what they look like, you will stand on good footing to becoming a trader who has success. Applying other techniques is also advisable. This includes implementing automated trading software, as well as plenty of market research. On top of that, it is imperative you make the most of live trading techniques. Including dollar cost averaging. This gives you the best opportunity to make money.

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