Since candlesticks are the basic building block of most technical analysis, the ability to recognize different candlestick patterns is a crucial trading skill.
First though, let’s start with a definition.
What Is an Evening Doji Star Pattern?
An evening doji star pattern is a 3-candlestick formation that may signal a bearish reversal. It may appear during an uptrend and is made up of a large bullish candle followed by a doji and a large bearish candle.
It is a subtype of the doji star pattern and the opposite of the morning doji star. It is also very similar to the bearish abandoned baby and evening star patterns. For all of these patterns, the middle candle is essentially the apex of a potential reversal.
Of course, no candlestick pattern guarantees a particular outcome. Instead, they offer clues as to what is going on in the market.
So the question is, what does a doji star really tell you?
What Evening Doji Star Patterns Mean
Like many candlestick patterns, the name itself doesn’t reveal much.
In Japanese, doji means “the same thing,” highlighting that the open and close are exactly the same. So half the name is based on the middle candle. The “star” part probably comes from how the pattern looks. The small, doji candle is reminiscent of a twinkling star (or something like that).
In trading terms:
- During the first period, price continued the pre-existing uptrend.
- During the second period, neither side was able to maintain control.
- During the third period, price moved back down, threatening the uptrend.
This sets the stage for bearish reversal, as it appears the uptrend may be nearing exhaustion.
How To Recognize Evening Doji Star Candlestick Patterns
Traders are attracted to patterns partly because they are easy to spot.
However, it’s also easy to see things on the charts that aren’t truly there (or anticipate events that never come to fruition). That’s one of the reasons why waiting for confirmation is so important.
Technically, an evening doji star pattern must:
- Appear during an uptrend
- Begin with a bullish long candle
- Have any doji other than a four-price doji as the second candle
- End with a bearish long candle of similar size to the first candle
- Contain no gaps
In practicality though, many traders will make various exceptions.
- The first and third candles can be different lengths, as long as they are both long line candles and/or test important price levels.
- The second candle doesn’t necessarily have to be a doji, as long as it is a short line candle.
- There can be more than one doji (or short candle) between the first and final candlestick.
Depending on who you ask, any of these standards may be more or less important. Moreover, some of these variations may be more properly classified as other reversal candlestick patterns, such as the bearish abandoned baby or evening star.
Remember, identifying the reversal itself is more important than labeling the formation. That’s not to say these standards are completely unimportant (as we’ll touch on shortly). It’s just to say that the implications are more important than the criteria.
In other words, you need to put it into context.
Where Evening Doji Stars Fit in the Chart Narrative
The markets are often characterized as a battle between the bulls and the bears.
Evening doji star patterns show that the bulls attempted to press their advantage on candle one, stalled on candle two, and finally surrendered momentum to the bears on candle three.
On the chart, it looks like a U-turn.
It might happen like this on a daily time frame:
On the first day, the bulls rode the momentum of the uptrend to push price up toward previous resistance. On the second day, trading activity slowed down as market participants were unsure whether price could break through or not. Ultimately, price closed exactly where it opened. Buoyed by this, bears showed up in force on the third day, resulting in a powerful move back down to the first day’s open.
From here, the ball seems to be in the bears’ court.
In the short-term, it amounts to a bearish counterpunch.
The question traders need to ask themselves is, “Are the bears in control now or was this just a short-term rejection from prior resistance?”
To answer that question, you’ll need more than just an understanding of Japanese candlesticks and candlestick patterns. You’ll want to analyze both within the context of greater chart patterns as well as trend and price levels. You’ll also want to make use of your own chart markup and indicators.
Analyze the history of your preferred asset(s) with respect to doji star patterns and apply it to your own trading style.
Now, you can test (and/or stretch) the criteria we mentioned above to find the most tradeable opportunities. For example, you may find that evening doji stars that feature a gravestone doji may play out more reliably than those that don’t. Or, you may find something else entirely.
Here is where the story in the charts begins to come into focus.
This is what we call technical analysis.
How To Trade Evening Doji Star Patterns
Bearish reversal points are great places to exit longs or enter shorts.
Evening doji star patterns serve as easy-to-spot signs of potential bearish reversal—and may even lead to longer-term tops when found on higher time frames.
Generally, you can put more weight into multi-stick patterns than single candles. They give you more information over a longer amount of time. Still, it is considered unwise to trade based on candlestick patterns alone. They rarely have extremely high hit rates by themselves.
You need additional points of confluence to shift the probabilities in your favor.
Some of the more important ones include:•
- Volume – Reversals are often accompanied by elevated trading volume. For evening doji stars, be on the lookout for it on the second and (especially) the third candles.
- Price Formations – Evening doji stars that form near important resistance levels are usually more likely to lead to sustained reversals. They may also reinforce the strength of such levels.
- Oscillator Shift – Oscillating indicators like the RSI or stochastics are commonly used to identify reversals by analyzing slope, percentile, and/or divergence.
The fewer such factors corroborating the reversal, the less confident you can be about it.
It would be difficult to form a comprehensive trading strategy around doji star patterns (whether bullish or bearish). There simply isn’t enough there to develop a strong edge. Even with a great understanding of trading math, orders, psychology, risk management, options, and automation, you’d still have a hard time.
You’re much better off building your strategy around other tools then using reversal patterns as an additional point of confirmation.
Patterns like the doji star are much better idea givers than trade makers.
Other Candlestick Pattern Types
The evening doji star is but one of many candlestick patterns.
You’d be wise to get familiar with all of the other ones too.
- Abandoned Baby – Bearish/Bullish
- Counterattack Line – Bearish/Bullish
- Engulfing – Bearish/Bullish
- Harami – Bearish/Bullish
- Harami Cross – Bearish/Bullish
- In Neck – Bearish/Bullish
- Mat Hold – Bearish/Bullish
- On Neck – Bearish/Bullish
- Star – Evening/Morning
- Tasuki Gap – Downside/Upside
- Three Inside – Down/Up
- Three Methods – Falling/Rising
- Three Outside – Down/Up
- Tweezer – Top/Bottom
- Window – Falling/Rising
Sure, there are quite a few of them. But don’t let that intimidate you.
It’s unnecessary to memorize all the names and criteria for every pattern. What’s more important is to learn the principles of price action and technical analysis.
In fact, you’re free to forget all of the names and specifications as long as you can look at a group of candlesticks and understand what they are trying to tell you.
Takeaways
To review:
Evening doji stars are a type of candlestick pattern that signals a potential bearish reversal. While not a guarantee, their appearance may indicate that market conditions are changing. Thus, they can help you find winning trades.
Of course, there are other candlestick patterns that you should learn about. And even so, the ability to recognize patterns is not enough to trade successfully on its own.
Nonetheless, you’ve now added one more tool to your toolkit.
Have questions or more information to add? Contribute to the conversation in the comments below! Or, if you know someone who could benefit from this post, share it with them. You can also check out our Candlestick Patterns Guide to improve your candlestick analysis skills.