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I have been looking at Doji's for the last two months and have come up with this strategy. I haven't come across this before and thought I would share this with you and ask for feedback and help to develop this further.
I call this the Cable Doji Straddle because I'm rubbish with titles and besides, it does exactly what it says on the tin.
This seems to work with any currency pair, but as I can't react quickly enough with lots of pairs and I'm lacking the programming skills to create an EA to do it for me, I'm using CABLE.
This also works on any time frame, but you will find less trades with the higher timeframes, mainly because as you can expect, there are fewer Doji's. I'm using the 15m time frame as this provides me with an average of 20 solid trades per week. If you trade with a lower time frame, you need to have quicker reactions to open trades or an EA or script.
You won't necessarily get rich from this strategy in its current form, but with improvement, i think it could be more of a winner than a loser.
The rules are easy to follow but must be placed quickly:
On a Cable 15m chart, wait for Doji (for those new to forex... you should read about candle patterns... try Candlestick Charting for Dummies, its pretty good and speaks in a language we can all understand).
Immediately after the Doji has formed, place a pending buystop at the high of the Doji and pending sellstop at the low of the Doji. If your broker has set a minimum number of pips from the open price to the market price, set your pending trades accordlingly. Set the expiry to be 6 hours.
If the current market price is the same or higher than the Doji High, then open an immediate buy position. If the current market price is the same or lower than the Doji low, then open an immediate sell position.
Set a take profit of 20 pips for both trades, although I monitor this myself and have taken higher profits.
I don't set a stoploss as I also monitor this manually too, so set a stoploss to whatever you feel comfortable with, although experience tells me it should be at least 4 times the length of the Doji body.
If a new Doji forms before the previous pending trades have been executed, then delete the previous pending orders and create new ones.
You don't need to close the opposite position unless you are frightened of whipsaws. Experience tells me this only really occurs if you are greedy or are trading news times.
Thats it! I have been using this on a demo account and done some manual backtesting and it looks to be pretty good, provided you aren't greedy and don't trade news.
I could get better results if someone could write me a script to place straddle trades as soon as Doji has formed or an audible indicator to let me know when a doji has fomed for when i am not at my machine (although this seems to be hardly ever these days... bloody forex is taking over my life!)
Anyway, please contribute towards this as I will be using this as part of my arsenal when I go live with a real trading account the week after next.
I look forward to your constructive critisisms, questions and other input!
I don't quite follow you... A Doji is defined as a candle where the open and close price is the same (well, the same to whatever decimal point that your broker sets).
Does this answer your question? If not then please give your definition of a Doji and perhaps expand further.
Quote:
Originally Posted by robp
Thanks for sharing. For purposes of this, within how many pips are you calling a candle a doji? Or are you looking for exact dojis?
Yes, that's an exact doji. But a lot of traders still consider a candle a doji if the open and close are within a few pips of each other. And I was just asking if you had some allowance there for your method, but it sounds like you are looking for exact dojis.
Quote:
Originally Posted by Limstylz
Hi robp,
I don't quite follow you... A Doji is defined as a candle where the open and close price is the same (well, the same to whatever decimal point that your broker sets).
Does this answer your question? If not then please give your definition of a Doji and perhaps expand further.
robp made a good point, there are some traders who define a Doji as a candle with the open and close within 1-3 pips of each other. This is not my definition and is not the true definition of a Doji candle.
If you were to use anything other than a true Doji candle, you would find that this stategy does not work, well at least not as well as using the real thing... Doji's typically are used to signal a change in trend or to signify a strengthening of support or resistance levels, which is why they are ideal for straddle methods.
I have attached a chart with Doji's in yellow and check marks indicating their formation...
You just need to adjust the properties of the chart and this does it by default.
Right click chart > properties > colors tab
Here are my colours:
bar up (mine is blue)
bar down (mine is red)
bull candle (mine is blue)
bear candle (mine is red)
Line graph (mine is yellow... this is what displays the Doji as it is neither a bullish nor a bearish position and therefore cannot be distinguished as such)
I am aware that there is code to distinguish a Doji (Open [1] == Close [1]), but I am unable to integrate this into any usable EA, script or indicator. Perhaps someone can help with this?
Quote:
Originally Posted by robp
Do you have an indi that paints them yellow as in your pic?
Seems to be a good strategy if it works on a 15minute chart, And yes, it would be great is someone could code and alarm cum arrow indicator so that we could get an alarm on doji formation instead of being tied to the screen waiting on the doji.
I would suggest that if anyone interested in this strategy and want to back test it, use the trading simulator Ive attached to see how profitable or successful this strategy is.
Thanks for sharing. For purposes of this, within how many pips are you calling a candle a doji? Or are you looking for exact dojis?
Quote:
Originally Posted by Limstylz
Hi robp,
I don't quite follow you... A Doji is defined as a candle where the open and close price is the same (well, the same to whatever decimal point that your broker sets).
Does this answer your question? If not then please give your definition of a Doji and perhaps expand further.
Quote:
Originally Posted by robp
Yes, that's an exact doji. But a lot of traders still consider a candle a doji if the open and close are within a few pips of each other. And I was just asking if you had some allowance there for your method, but it sounds like you are looking for exact dojis.
Maybe we can make this questions to an expert, Steve Nisson:
Quote:
Doji
One of the more important individual candlestick lines is the doji.
A doji session has a horizontal line instead of a real body.
This is because a doji is formed when the session's open and close are the same (or almost the same). If the market is trading laterallv, a doji is neutral.
In essence the doji is echoing, on a micro scale, the indecision reflected on a more macro scale by the market's sideways action.
However, a doji that emerges after the mature part of an uptrend or sell-off has a greater chance of a market turn. At such a time, the
Japanese say that a doji provides "a hint of tops and bottoms."
One should be especially cautious about a doji that arises after a tall white candle which in turn appears after a significant uptrend. This is
true whether the doji is within the prior long white real body or above it. Such action represents a disparity about the state of the market.
Specifically, the rally and tall white candles during such a rally tell us that the bulls are still in charge. But a doji means that the bulls are failing to
sustain the upside drive.
How do you decide whether a near doji day (i.e., where the open and close are very close, but not exact) should be considered a doji? One
method is to look at a near doji day and compare it to recent action. If there is a series of very small real bodies, I would not view the near doji
day as significant since so many other recent periods had small real bodies or doji. (Other methods are covered in my first book).
As mentioned before, a doji is meaningful when it arises after a tall white candle during an uptrend. In this scenario, the market is consid-
ered by the Japanese to be "tired."
That whole page confirmed my initial thoughts on Doji's role in the market. For the purposes of this strategy however, I will define a Doji as this:
A candle with a close price which is EXACTLY the same as its open price (as far as your broker define its' decimal place), REGARDLESS of body length (and I'm almost certain that Mr Nisson would agree that both girth and length do not matter, but Mrs Nisson may not ;P)
My previous picture may have been a little discombobulating as it was in bar mode. The picture attached now shows candle mode with Doji's
Anyway... I spent all day writing this script that I'm now using to place orders with, but its no good unless i'm in front of my machine. Does anyone have an audible Doji alarm they can share please?
Last edited by Limstylz; 09-25-2008 at 04:55 AM.
Reason: Attached picture
Linear Mode
