Four Price Doji Candlestick Pattern: Backtest Analysis

In markets with very low volatility, the price may not move much or even move at all in a trading session, giving rise to uncommon candlestick patterns, such as the Four Price Doji. As with many other candlestick patterns, it tells a story about the market and how the price might move in the future. Want to know about the Four Price Doji candlestick pattern trading strategy?

The Four Price Doji candlestick pattern is a candlestick where open, high, low, and close are all at the same level. This candle pattern shows the highest extent of indecision between bulls and bears. It is normally seen in assets with low trading volume or during periods of low volatility, as in pre-market and after-hours trading.

In this post, we take a look at the Four Price Doji candlestick pattern trading strategy.

Understanding the Four Price Doji candlestick pattern

The Four Price Doji is a specific type of candlestick pattern where open, high, low, and close are all at the same level. This candle pattern shows the highest extent of indecision between bulls and bears. It is a pattern that reflects the balance of power between buyers and sellers in a financial market, such as stocks, forex, or commodities.

Depending on the type of trend where it forms and the surrounding candlesticks, the Four Price Doji can have a bullish or bearish implication. It is considered a bullish reversal pattern when it appears after a downtrend as part of a morning doji star pattern or bullish tristar doji pattern. On the other hand, it is considered a bearish reversal pattern when it appears after an uptrend as a part of an evening doji star pattern or bearish tristar doji pattern. In this situation, it could signal a change in market sentiment and could potentially indicate a trend reversal in the near future.

This pattern is normally seen in assets with low trading volume or during periods of low volatility, such as pre-market and after-hours trading. This is because the pattern forms when there is little price movement, and the asset remains at the same price level for the entire trading day. As a result, traders should be careful when interpreting the Four Price Doji, as it can also be seen in flat markets or during periods of consolidation. In such cases, it could be difficult to determine the future direction of the trend.

It is recommended to use the Four Price Doji as a part of a more reliable candlestick pattern, such as the morning or evening doji star, and in conjunction with other technical indicators and analysis methods for a more complete picture of market sentiment.

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Key characteristics of the Four Price Doji pattern

The Four Price Doji is a candlestick pattern that is widely used in technical analysis and considered an important pattern for price action traders who know how to use it. The following are the key characteristics of the pattern:

  • Equal Open, High, Low, and Close prices: The Four Price Doji forms when the opening, high, low, and closing prices of an asset are all at the same level, which creates a unique visual representation on a price chart.
  • Flat markets: The Four Price Doji can appear in flat markets or during periods of consolidation, making it difficult to determine the future direction of the trend.
  • Low trading volume: This pattern is often associated with low trading volume. It is often seen in instruments with low trading volume, such as
  • Low volatility: The pattern is seen in assets with low volatility or during periods of low volatility, such as pre-market and after-hours trading.
  • Indecision: The Four Price Doji reflects the balance of power between buyers and sellers in the market and indicates indecision among market participants.
  • Useful as a part of other patterns: The Four Price Doji can be considered a reversal pattern when it is a part of other patterns, such as the morning or evening doji star pattern. This pattern can signal a potential trend reversal, either bullish or bearish, depending on its location within the trend. If it appears after a downtrend, it could indicate a bullish reversal, while if it appears after an uptrend, it could indicate a bearish reversal.Top of Form

How to identify a Four Price Doji pattern

The Four Price Doji is a candlestick where the open, high, low, and close prices are equal, indicating indecision between buyers and sellers. It’s commonly seen in assets with low trading volume or during periods of low volatility such as pre-market and after-hours trading. To identify this pattern, here are what to look for:

  • Low-volatility market: Look for it in a market with low volatility, such as premarket and after-hours markets.
  • Low-liquidity market: Look for it in markets with very little trading volume.
  • The same open, close, high, and low prices: The open, close, high, and low prices must be at the same level.
  • Representation: The pattern is represented with a single horizontal line or simply a dash ‘—’.
How to identify a Four Price Doji pattern
Four Price Doji pattern example

Other factors to look for when identifying and analyzing the Four Price Doji pattern include:

  • The surrounding candlesticks and the pattern they form together
  • Whether they appear in an upswing, in which case the pattern would have a bearish reversal significance
  • Whether they appear in a downswing, in which case the pattern would have a bullish reversal significance

Using Four Price Doji in combination with other technical indicators

The Four Price Doji is a valuable candlestick pattern for price action traders, but it should not be used as a standalone indicator. To gain a deeper understanding of market sentiment and the potential for trend reversals, it is important to use the Four Price Doji as a part of a more reliable pattern such as the morning or evening doji star, as well as in combination with other technical tools and indicators.

One popular combination is using the Four Price Doji with moving averages. Moving averages can help confirm the trend reversal indicated by the Four Price Doji. For example, if the Four Price Doji appears after a downtrend, a bullish crossover of the 20-day and 100-day moving averages could confirm a potential reversal to the upside.

Another useful combination is using the Four Price Doji with trendlines. Trend lines can help traders and investors see the potential for trend reversals and confirm the validity of the Four Price Doji. For example, if the Four Price Doji appears after a downtrend, a break above a downward trendline could indicate a potential bullish reversal.

Oscillators can also be used in conjunction with the Four Price Doji. Oscillators, such as the relative strength index (RSI) or stochastic oscillator, can help traders and investors identify overbought and oversold conditions in the market and confirm the potential for trend reversals. For example, if the Four Price Doji appears after a downtrend, a bullish cross of the RSI from below 30 could confirm a potential bullish reversal.

Finally, it is important to consider the volume of the asset in question when using the Four Price Doji in combination with other technical indicators. Low trading volume can be a characteristic of the Four Price Doji pattern, and this low volume should be considered when interpreting the pattern and other technical indicators. The subsequent candlestick in the anticipated reversal direction must be on a higher volume.

Four Price Doji and market sentiment analysis

The Four Price Doji is a valuable tool for market sentiment analysis. Market sentiment refers to the collective mood of market participants and their expectations for future market conditions. By analyzing market sentiment, traders and investors can gain a deeper understanding of market dynamics and make informed decisions.

The Four Price Doji pattern reflects the highest extent of indecision between bulls and bears in the market. It shows that neither the bulls nor the bears are convinced enough in their direction to push the price further from its open price. However, when the pattern appears as a part of well-known reversal patterns, such as morning doji star, evening doji star, bullish tristar doji, or bearish tristar doji, it signals a potential trend reversal and suggests that market participants are no longer interested in the current direction of the market. This can indicate a shift in market sentiment from bullish to bearish or vice versa.

Price action traders can use the Four Price Doji in combination with other technical indicators and analysis methods to gain a more complete picture of market sentiment. For example, the appearance of a Four Price Doji after a downtrend could indicate a potential shift in market sentiment from bearish to bullish. This could be confirmed by a bullish crossover of the 50-day and 200-day moving averages or a bullish cross of RSI from below 30.

However, it is important to consider the context of the market when analyzing market sentiment with the Four Price Doji. The pattern should be situated either after a downtrend or an uptrend, and the market should be characterized by low trading volume or periods of low volatility.

Four Price Doji pattern and trend reversal

When occurring as a part of a more popular reversal pattern, the Four Price Doji pattern candlestick pattern is used by price traders to identify potential trend reversals. A trend reversal refers to a change in the direction of a market trend, from bullish to bearish or vice versa. Trend reversals can be significant events in the market and can have a major impact on the price of an asset.

The Four Price Doji shows complete indecision between bulls and bears in the market, and depending on the context and the type of the surrounding candlesticks, it may signal a potential trend reversal and suggests that market participants are uncertain about the future direction of the market. This can indicate a shift in market sentiment from bullish to bearish or vice versa.

However, for the pattern to have a trend reversal significance, it should be situated either after a downtrend or an uptrend, and the market should be characterized by low trading volume or periods of low volatility. Traders can use the Four Price Doji in combination with other technical indicators and analysis methods to confirm potential trend reversals.

Trading with Four Price Doji – entry and exit strategy

The Four Price Doji pattern can be a valuable tool for traders in determining their entry and exit strategy when trading. The pattern can signal a potential trend reversal when considered with supportive candlesticks around it. For example, when occurring as a part of the morning doji star pattern in a downswing, it signals a potential bullish reversal.

So, when trading with the Four Price Doji, traders may choose to enter a long position if the pattern appears after a downtrend. Conversely, they may choose to enter a short position if the pattern appears after an uptrend. This is because the Four Price Doji suggests a potential shift in market sentiment from bearish to bullish or vice versa, indicating a potential trend reversal.

In terms of an exit strategy, traders may consider using stop-loss orders or take-profit orders. Stop-loss orders are used to limit potential losses, while take-profit orders are used to lock in profits. Traders may also consider using a trailing stop-loss order, which adjusts the stop-loss price as the market moves in their favor. It may also be possible to use the opposite signal as an exit strategy. For example, a long position can be closed if an evening doji star pattern appears on the chart.

It is important to remember that the Four Price Doji should be used in combination with other technical indicators and analysis methods to confirm the entry signals. For example, RSI overbought and oversold signals can help confirm bearish and bullish reversal signals respectively. Traders should also consider the context of the market, including trading volume and volatility, when determining their entry and exit strategy.

Four Price Doji and market volatility

The Four Price Doji is closely related to market volatility — the degree of fluctuation in the price of an asset over a given period of time. When the market is characterized by high volatility, prices can move rapidly and unpredictably, but when volatility is low, the market barely moves, creating the right condition for the Four Price Doji pattern to form.

The Four Price Doji is commonly seen in assets that normally have low volatility and barely moves all trading session. Such assets often have fee participants trading the market. Also, in assets with normal volatility during market hours, it is not uncommon to find the Four Price Doji pattern during periods of low volatility, such as in pre-market and after-hours trading.

When the Four Price Doji appears in a market with low volatility, it signals a potential shift in market sentiment and suggests that market participants are uncertain about the future direction of the market. In some cases, the pattern may appear in markets characterized by high volatility, indicating that market participants are uncertain about the future direction of the market despite high price fluctuations. In these cases, traders should consider using additional technical analysis methods to gain a deeper understanding of market volatility.

Four Price Doji in short-term and long-term trading

The Four Price Doji pattern can be used by traders in both short-term and long-term trading. It all depends on the timeframe. In short-term trading, the pattern can signal a potential trend reversal and provide traders with an opportunity to enter or exit a position quickly. In this context, traders may consider using the pattern in combination with other technical indicators to confirm potential trend reversals and to know when to enter or exit positions.

In long-term trading, the Four Price Doji may provide traders with a broader view of market sentiment and help identify potential shifts in market trends over a longer period of time. In this context, traders may consider using the pattern as one of several tools for analysis, along with other technical indicators, fundamental analysis, and market news and events.

Four Price Doji and risk management techniques

Risk management is a critical component of successful trading and investing, as it helps traders minimize losses and maximize returns over time. The Four Price Doji pattern is a useful tool for traders to consider when implementing risk management techniques.

One risk management technique that traders can consider when using the Four Price Doji is to set stop-loss orders. By setting a stop-loss order, traders can limit their potential losses if the market does not move as anticipated.

Another risk management technique that traders can use is position sizing. This helps to limit the amount of capital at risk. It is often recommended to risk no more than 1-2% of the total account capital in each trade. This way, the trader can afford to have a streak of losses without being knocked out of the game.

Traders can also use a trailing stop-loss order, which adjusts the stop-loss price as the market moves in their direction, to manage risks and lock in profits. Additionally, traders may consider using the opposite signal as an exit strategy to limit losses. For instance, if a long position is held and an evening doji star pattern emerges on the chart, the trader may choose to close the position.

FAQ:

When does the Four Price Doji pattern occur?

The Four Price Doji is a candlestick pattern where open, high, low, and close are all at the same level. It indicates a high degree of indecision between bulls and bears in the market. The pattern typically occurs in markets with low volatility or during periods of low trading volume, such as pre-market and after-hours trading.

How can I use the Four Price Doji for trading?

The Four Price Doji can signal potential trend reversals. When it appears after a downtrend, it may indicate a bullish reversal, and vice versa. Traders can use it in combination with other technical indicators for confirmation. The reliability of the Four Price Doji depends on the context and surrounding candlesticks. It is recommended to use it as part of a more reliable candlestick pattern and in conjunction with other technical analysis tools.

What is the significance of the Four Price Doji in market sentiment?

The reliability of the Four Price Doji depends on the context and surrounding candlesticks. The Four Price Doji reflects the highest level of indecision between buyers and sellers. It can signal a potential shift in market sentiment, especially when part of well-known reversal patterns.

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