Morning Doji Star Candlestick Pattern | Examples & Trading

The Morning Doji Star is a bullish reversal pattern that signals the potential end of the ongoing downward trend (downtrend). The pattern consists of a long-bodied bearish candle (1st candle), a doji (2nd candle), and a long-bodied bullish candle (3rd candle). The pattern is widely acclaimed as a more reliable variant of the classic Morning Star formation, where rather than having a short-bodied candle, the second candle is a doji, representing a state of “market equilibrium” where neither buyers nor sellers are in control of price.

This distinct rare pattern visually illustrates the shift in market sentiment from bearish (1st candle), to indecisive (2nd candle), and finally to bullish (third candle). As a result, traders use the morning doji star as a bullish signal to take a long position as they anticipate an upcoming upward price rally.

How Does the Morning Doji Star Form?

The morning doji star pattern forms over the span of three candlestick periods (for example: three days on a daily chart or three hours on an hourly chart). The pattern is composed of three candles: a long-bodied bearish candle (1st candle), a doji (2nd candle), and a long bullish candle (3rd candle). Note that it must form at the bottom of an ongoing downtrend for it to be considered valid. 

In contrast, any candlestick formation that resembles the characteristics of a morning doji star but appears during either an uptrend or a non-trending (sideways-moving) period is invalid. This is because, by definition, the morning doji star is a bullish reversal pattern. Threfore, if it appears during an uptrend, then it simply validates the existing bullish trend, and if it shows up during a non-trending period, well, there was no trend to reverse in the first place.

What Does the Morning Doji Star Pattern Mean?

The meaning of the morning doji star pattern revolves around its classification as a bullish reversal pattern. Put simply, the pattern indicates the potential trend reversal from downtrend to an uptrend.

Here’s a deeper look into the market psychology behind its interpretation from a technical analysis perspective:

• 1st candle meaning: As a long-bodied bearish candle, it reflects a decisive selling pressure that points to a continuation of the ongoing downtrend. From a market psychology standpoint, it also reflects how sellers have clearly taken control of the price action.
• 2nd candle meaning: As a doji, the second candle initially opens noticeably lower, creating a gap down, making it seem like the price will continue its bearish trend. Nevertheless, despite the expected selling pressure, the candle ends up closing at the same price as it opened at.

In terms of market psychology, this reflects a state of “market equilibrium” where neither buyers nor sellers decisively control price. As a result, the doji signals uncertainty about the price direction. Note that, from a technical analysis standpoint, this is not a decisive sign that a bullish reversal is, in fact, about to begin, since a doji, by nature, represents mere indecision.

• 3rd candle meaning: Lastly, the third candle, a long-bodied bullish candle that closes above the midpoint (50%) mark of the first candle, effectively serves as the “confirmation” that market sentiment has, in fact, shifted from bearish to bullish. This is due to the fact that the 3rd candle essentially recovered the significant price drop made by the 1st candle. In market psychology, this indicates that buyers have now taken control of price.

How to Identify the Morning Doji Star Pattern?

For a candlestick formation to be considered a “valid” morning doji star, it needs to meet these key characteristics when it formed:

• Chart Placement: It must form at the bottom of an ongoing downtrend. In contrast, any candlestick formation that look like the morning doji star but appears during either an uptrend or a non-trending (sideways-moving) period is invalid. 
• First Candle: It needs to be a relatively long-bodied red/black (bearish) candle.
• Second Candle: It needs to be a doji (a candle which lacks a body).
• Second Candle’s Gap Up: The 2nd candle’s opening price needs to be noticeably lower than the first candle’s closing price, creating a visually-identifiable gap down. 
• Third Candle: It needs to be a relatively long-bodied green/white (bullish) candle. It must also close above the midpoint (50%) of the first candle’s body. 

What is an Example of the Morning Doji Star Pattern?

As illustrated in the example above, we can see an ongoing downtrend as price makes lower lows. Suddenly, a morning doji star pattern formed at the bottom of this downtrend, signaling that the bearish move may be coming to an end. Indeed, the pattern successfully serves as a bullish reversal signal, as the price direction shifts toward an eventual uptrend. 

As shown, a valid morning doji star pattern can really become an extremely powerful signal for a bullish reversal strategy for trading diverse asset classes including stocks and forex. 

How to Trade the Morning Doji Star Pattern:

Using the morning doji star, the following is a simple 5-step process you can implement to start trading stocks, forex, and other asset classes:

Step 1: Identify a Valid Morning Doji Star Pattern – When Does It Appear?

The first step is to make sure the candlestick formation is a valid morning doji star pattern in the first place. Remember that as a bullish reversal pattern, it needs to appear at the bottom of a prevailing downtrend. Therefore, focus on examining the charts of assets exhibiting a clear downtrend, as this is the right market environment where a valid morning doji star pattern can appear.

Step 2: Determine Your Entry Point and Position Size

The second step is to identify your position size (i.e., the amount of capital you risk for that trade) as well as your specific entry point. For your entry, we recommend either:

• Aggressive Entry – Placing your buy order at the closing price of the pattern’s third candle. This type of approach places a high degree of confidence that the morning doji star pattern will immediately lead to a successful trend reversal to an uptrend.
• Conservative Entry – Placing your buy order after the price breaks above the high of the pattern’s third candle. This type of approach (as shown in the image above for illustration) waits to confirm the strength of a potential bullish rally. This lowers the risk that the morning doji star was simply a false bullish reversal signal. 

Step 3: Determine Your Stop Loss (SL) Level

After you pinpoint your entry, you then need to identify your definitive stop loss point where you will cut your losses if the price moves against your bias (i.e., downward). For your stop loss, we recommend either: 

• “Tighter” Stop Loss – Placing your stop loss (exit) order just below the third candle’s low (see above image for illustration).
• “Wider” Stop Loss – Placing your stop loss (exit) order below the low of the second candle (the pattern’s doji).

Between the two, a tighter stop loss reduces the risk you take (because it’s closer to your entry), but it can also be triggered prematurely if the price makes wild swings before moving upward. In contrast, a wider stop loss lowers the chance of being triggered prematurely but comes at the cost of a greater risk, since it’s farther from your entry point.

Step 4: Set Your Target Price (TP)

The fourth step is to identify your target price/s where you will definitively exit the trade if it goes in your favor (i.e., the price moves upward). Generally, we recommend selling in tranches, so you can potentially capture a bigger profit potential if the bullish rally extends.

As shown above, we placed two TPs. Nevertheless, it’s important that your TPs are based on an objective metric such as key structural levels where price will likely encounter significant selling pressure that could stop the bullish rally.

Step 5: Open the Trade

Finally, the last step is to formally open the trade by placing your buy order at your pinpointed entry point and setting up your stop loss and target prices orders in advance. By doing this, you will mitigate the very real risk of an emotional/impulsive response due to not having a trade plan in the first place. In your trading strategy, we also advocate to only take positions with at least a 1:2 risk-reward ratio (i.e., the upside potential is 2x the potential downside).

Is the Morning Doji Star Bullish or Bearish?

Being a bullish reversal pattern, the morning doji star is definitively bullish by nature. In fact, the pattern’s market psychology supports this as it reflects the gradual shift in market sentiment from bearish (1st candle), to indecisive (2nd candle), and to bullish (3rd candle). Hence, the pattern points to a bullish rally that will likely follow.

These Are The Best Trading Strategies for the Morning Doji Star:

The following are three of the best trading strategies you can use to trade diverse asset classes such as stocks and forex using the morning doji star:

• Trading with Volume (Settings: MA Length 20)
• Trading with RSI (Settings: Default – 14 SMA, 2 Standard Deviation)
• Trading using Market Structure (Historical Price)

Here are examples of using these trading strategies with the morning doji star: 

1. Trading the Morning Doji Star with Volume

Volume Settings: Default (MA Length: 20)

First, we can integrate volume in our analysis of the viability of a potential reversal set-up. As shown above, we can observe an ongoing downtrend when the morning doji star pattern suddenly developed at the bottom of the trend. 

The pattern is then backed by significant volume spikes, signalling an elevated interest from market participants. In this case, the elevated volume levels serves as a confirmation of heightened market interest. Furthermore, the high volume during the pattern’s third candle reflects the substantial buying pressure that could very well drive a potential bullish rally.

How to Trade (Trade Setup): 

• Entry: Place your entry just above the high of the morning doji star’s 3rd candle. 
• Stop Loss: Place your stop loss just below the low of the pattern’s 3rd candle.
• Take Profit: Place your TP just below the nearest resistance level.

2. Trading the Morning Doji Star with RSI

RSI Settings: Default (14 SMA, 2 Standard Deviation)

Second, one of the best technical analysis tools you can use with the morning doji star is the RSI indicator. Specifically, RSI offers valuable insight when used as a divergence tool. A “divergence” occurs when the RSI deviates from the direction of the price movement. When this happens, it signals that the current trend’s momentum is weakening and a trend reversal can  potentially occur.

As shown above, we can observe that the price is making lower lows, exhibiting a classic downtrend. However, when we integrate the RSI indicator and compare their movements, we can see a divergence where while price continues to go down, RSI is starting to make higher lows. 

In this case, the RSI acts as a bullish reversal signal, while the appearance of the morning doji star provides the needed confirmation, potentially marking the starting point for the bullish reversal to materialize.

How to Trade (Trade Setup): 

• Entry: Place your entry just above the high of the morning doji star’s 3rd candle. 
• Stop Loss: Place your stop loss just below the low of the pattern’s 3rd candle.
• Take Profit: Place your TP just below the nearest resistance level.

3. Trading the Morning Doji Star with Market Structure

Third, you can also trade the morning doji star pattern with the consideration of the broader market structure. You can do this by zooming out the chart to see if the pattern has occurred at a key structural price level. Note that price structures tend to become stronger as more time passes by and, more importantly, the more the price level is tested and successfully held.

As shown above, when we zoom out, we can see that the morning doji star pattern occurred at a previous all time low level. This level has also been tested in the past and held. Hence, this essentially serves as an added layer of confirmation that the pattern will likely lead to a bullish reversal or, at the very least, the price will not likely pierce below this level anytime soon.

How to Trade (Trade Setup): 

• Entry: Place your entry just above the high of the morning doji star’s 3rd candle. 
• Stop Loss: Place your stop loss below the all-time low support level.
• Take Profit: Place your TP just below the nearest key structural level.

What is the Success Rate of the Morning Doji Star?

Generally, the morning doji star pattern has a success rate of roughly 50-60%. Note, however, that the pattern’s success rate depends on the specific market environment, asset class, and trade setup. Hence, determining the exact success rate of the pattern is difficult as there are numerous factors that can affect it. That said, the pattern’s overall success rate improves when it’s complemented by technical indicators (e.g., volume, RSI) that can add an extra layer of synergy.

What are the Pros and Cons of the Morning Doji Star?

What are the Advantages of the Morning Doji Star Pattern?

Here are the distinct advantages of integrating the morning doji star on your trading strategy:

• Illustrates clearly the transition in market sentiment: First, when a valid morning doji star pattern appears on the chart, we can easily identify the shift in market sentiment that occurred by simply looking at the pattern’s three candles. From bearish (its 1st candle), to indecisive (its 2nd candle being a doji), and to bullish (its 3rd candle).
• Complements other technical confirmation tools well: Second, the morning doji star pattern works well with other technical confirmation tools such as RSI and Volume. By doing so, these complementary technical tools improve the reliability of the pattern as a bullish reversal signal.
• Among the most powerful bullish candlestick patterns: Lastly, the morning doji pattern, being a niche variation of the traditional morning star pattern, is widely considered to be one of the most reliable and accurate bullish reversal candlestick patterns that works across various asset classes such as stocks and forex.

What are the Disadvantages of the Morning Doji Star Pattern?

Here are the notable disadvantages that you need to be aware of when you integrate the morning doji star on your trading strategy:

• Does not always provide optimal entry points: First, due to the structure of the morning doji star, it cannot always provide an optimal entry. This is especially the case if the pattern’s 3rd candle is a long-ranged bullish candle, because this means your stop loss (if you put it below the 3rd candle’s low) is far from your entry point (if you enter at 3rd candle’s closing price or even higher).
• Limited usefulness on much lower time frames: Second, the morning doji star is one of the candlestick patterns that loses its reliability and becomes less accurate when used on much lower time frames (i.e., lower than the daily time frame). For example, if the pattern appears on a minutes-time frame, it does not usually lead to successful trend reversals on higher time frames (e.g., daily).
• Rare occurrence on price charts: Finally, due to it being a niche/unique variant of another candlestick pattern, the morning star, its appearance on the chart is rare and often far in between. Hence, if your trading strategy focuses on reversals, it cannot be your sole technical analysis tool as the pattern is extremely elusive.  

Can the Morning Doji Star Pattern Produce False Signals?

Yes, similar to any other candlestick pattern, the morning doji star is not immune to producing false signals. This is despite the fact that it is widely considered to be one of the most reliable bullish reversal candlestick patterns. It’s crucial to note that no technical analysis tool, including chart patterns, can be 100% accurate or reliable. At the end of the day, financial markets are independent and can move in unexpected directions.

What are the Alternatives to the Morning Doji Star Pattern?

Here are three viable alternatives you can use instead of a morning doji star pattern:

1. Bullish Engulfing Candlestick Pattern

Compared with the morning doji star, the bullish engulfing is a two-candlestick bullish reversal pattern that is composed of a small bearish candle (1st candle) and a long-ranged bullish candle (2nd candle) that “engulfs” or covers entirely the 1st candle. The bullish engulfing signifies a drastic shift in market sentiment from bearish to bullish as buyers quickly overwhelmed sellers.

2. Piercing Line Candlestick Pattern

The piercing line is a two-candlestick bullish reversal pattern that is composed of a long-bodied red candle (1st candle) and a long-bodied green candle (2nd candle) that closes above the halfway point (50%) of the 1st candle’s body. This pattern reflects sudden and decisive buying pressure during the second candle, recovering a substantial portion of the value lost during the 1st candle’s move.

3. Tweezer Bottom Candlestick Pattern

The tweezer bottom is a two-candlestick bullish reversal pattern composed of two candles with identical or nearly identical lows. Unlike the morning doji star, the tweezer bottom illustrates an active rejection of further lower prices, potentially hinting to a key support area being developed which can then signal a potential bounce upwards.

You can find more alternative patterns in our WR Trading Candlestick Cheat Sheet for free.

What Other Types of Dojis Exist?

The following are the other types of dojis that can appear on a price chart and of which you can use:

• Standard Doji
• Rickshaw Man Doji 
• Long-Legged Doji 
• Dragonfly Doji
• Gravestone Doji
• Four-Price Doji
• High Wave Doji
• Tri-Star Doji

For your reference, here’s is a quick overview of these various doji types:

1. Standard Doji

The standard doji has relatively short symmetrical wicks that make it look like a cross or a plus sign. As a candlestick pattern, the standard doji reflects a neutral market sentiment.

2. Rickshaw Man Doji

Similar to a standard doji, the rickshaw man has symmetrical upper and lower wicks. However both of its wicks are significantly larger than those of a standard doji.

3. Long-Legged Doji

Similar to the rickshaw man, the long-legged doji also has long wicks on both sides, however, one of its wicks (either upper or lower) is noticeably larger than the other.

4. Dragonfly Doji

The dragonfly doji looks like the capital letter “T.” It has extremely small or no upper wick at all while having a long lower wick.

5. Gravestone Doji

The gravestone doji is the reverse of the dragonfly doji and looks like an inverted capital letter “T.” It has a long upper wick while having an extremely small or no lower wick at all.

6. Four-Price Doji

A four-price doji looks like a minus sign or a hyphen. It does not have any wicks at all since its open, high, low, and close prices are all similar.

7. High Wave Doji

A high wave doji has exaggerated wicks on both sides, even much bigger than long-legged or rickshaw man dojis. This makes it literally stand out on a price chart.

8. Tri-Star Doji

The tri-star doji is an extremely rare formation consisting of 3 dojis appearing after each other. This type of doji usually occurs when volatility and liquidity in an asset are both extremely low.

Learn Pattern Trading with the WR Trading Mentoring

Facing an uncertain market environment, trading the morning doji star pattern can be especially challenging. Still, it remains a reliable reversal setup, especially among the many candlestick patterns we use when trading across different asset classes like forex and stocks. That said, if you’re aiming to master candlestick patterns as well as learn how successful traders adapt to diverse market conditions, consider joining our mentoring sessions at WR Trading.

Conclusion: Morning Doji Star is a Potent Yet Rare Bullish Reversal Signal

Overall, the morning doji star stands out as one of the strongest bullish reversal patterns for trading diverse asset classes, including stocks and forex. Visually, it clearly illustrates the gradual shift in market sentiment, from bearish (1st candle), to indecisive (2nd candle), and ultimately to bullish (3rd candle).

Still, as a niche variation of the traditional morning star, it rarely appears on the chart. This rarity, however, makes it highly sought after, particularly by those looking to trade potential trend reversals. This is because it offers extremely valuable insight into current market sentiment and, of course, hints at where price is likely headed next.