There are two versions of the Doji Star candlestick pattern, a bullish and bearish, this overview will cover the bullish pattern version.
In theory the bullish Doji Star acts as a bullish reversal most of the time, while the bearish version acts as a bearish reversal signal. But according to Bulkowski both patterns do not behave in the way they are theorized to. Find the stats below.
The first candle in the bullish Doji Star is a large full bodied bearish candle.
The second candle is a Doji candle that should gap below the body of the first candle. Both candle’s wicks are allowed to overlap but their open and closing points should not touch.
At this point, it’s theorized that the pattern reverses upwards, but according to Bulkowski’s testing the bullish Doji Star pattern acts as a bearish continuation pattern around 64% of the time. This is a significant difference. So it’s a good idea to be aware of the patterns high’s and low’s and to be prepared to take a trade in either direction.
The longer the lower wick of the Doji, the higher the likelihood that price moves upwards in a bullish direction, so just keep that in mind if you spot a Doji Star pattern.