Understanding the Evening Doji Star

What is the Evening Doji Star?

The Evening Doji Star is a bearish reversal candlestick pattern that signifies a potential trend reversal from bullish to bearish. It consists of three candles:

1. A long bullish candlestick.
2. A Doji candlestick, which indicates indecision.
3. A bearish candlestick that closes below the midpoint of the first candle.

How is the Evening Doji Star Identified?

The Evening Doji Star pattern is identified by:

1. First Candle: A long bullish candlestick that demonstrates a strong uptrend.
2. Second Candle (Doji): A Doji candlestick with open and close prices very close or equal, indicating market indecision.
3. Third Candle: A bearish candlestick that closes below the midpoint of the first candle, confirming the reversal.

When to Use the Evening Doji Star

The Evening Doji Star pattern is useful for:

• Reversal Scenarios: When it appears after a strong uptrend, it can signal a potential reversal.
• Confirmation: Use additional indicators or subsequent candles to confirm the bearish reversal signal.

Formula Example

To identify the Evening Doji Star:

1. Identify the First Candle:
   • Condition: A long bullish candlestick in an uptrend.
2. Check for the Doji:
   • Condition: A Doji candle with open and close prices very close or equal.
3. Assess the Third Candle:
   • Condition: The third candle should be bearish and close below the midpoint of the first bullish candle.

For example:

• First Candle (Bullish): Open = 100, Close = 110
• Second Candle (Doji): Open = 110, Close = 110
• Third Candle (Bearish): Open = 110, Close = 105
• Condition Met: The Evening Doji Star pattern is confirmed when the third candle closes below the midpoint of the first candle.

Parameters

The parameters for identifying the Evening Doji Star pattern include:

• Data: Defines the type of data to use for the pattern.

  • Value: ohlc
  • Description: The pattern uses Open, High, Low, and Close prices.

• Previous N Candles: Number of preceding candles to check.

  • Default Value: 1
  • Min Value: 1
  • Max Value: 300
  • Description: Checks for the Evening Doji Star pattern in the last N candles.

• Tolerance: Acceptable range for the Doji body size.

  • Default Value: 0.1
  • Min Value: 0
  • Max Value: 1
  • Description: The body size of the Doji must fall within this tolerance level relative to the shadows.

Conclusion

The Evening Doji Star candlestick pattern is a powerful indicator of a potential bearish reversal in an uptrend. It should be used with other technical indicators and confirmation signals to validate the reversal and make informed trading decisions.