18# Low close doji and High close doji
Candlestick patterns LCD and HCD
Submit by Ferrer 04/01/2014
Low close doji and High close doji are two candlestick patterns.
Trading with doji
Time Frame 4H or daily,
25 EMA Channel (25 Ema High and 25 EMA low).
Low close doji (LCD)
It is a setup developed on the premise that once the market has rallied and established a high, when a doji forms, it is indicating there is indecision; and once we es- tablish a lower closing low below the doji’s low, as shown in Figure which establishes that there is a loss in bullish momentum, we can initiate a short position.
When the market is in an extended trend to the upside and the market is overbought, a doji appears, indicating indecision and weakness of buyers to maintain the upward trend. Pay particular attention if the candle preceding the doji is a tall white candle, which would be a two-candle pattern called a bearish harami doji cross. Watch for increased volume, as this also con- firms a blow-off-top formation.
Trading Rules When a doji appears, you should:
• Sell on the close or the next time period’s open once a new closing low is made from the previous time period’s doji’s low, especially when the market is against a key pivot point resistance target number. • Place stops above the highest high point of the initial doji candle. Stops should be initially placed as a stop-close-only, meaning you do not exit the trade unless the market closes back above the doji’s high. • Exit on the open of the first candle after the previous candle makes a higher closing high than the previous candle.
You can use a filter confirming the signal, such as a MACD pattern
You initially placed a stop-close-only; but for an intraday time period, this would have been a mental stop-close-only because most order platforms do not have that feature for day trading. As the market has moved in your favor, you can place a hard stop above the doji high. There will be times when you have to make a judgment on whether the risk is too excessive by the distance of the proposed entry and the stop-close-only. Therefore, you may want to scale out of two-thirds of a position at the first sign you see the trend lose momentum
High close doji (HCD)
We are looking for a specific conditional change to take place in the market, namely a higher closing high above a doji’s high at the pivot point support level. This is the pattern I call the high close doji (HCD)
method. It has dimensions of specific criteria that need to fall in place, helping to eliminate and to filter out false signals. It is a simple and basic approach to candlestick chart patterns that is a high-probability winning strategy.
When the market is in an extended trend to the downside and the market condition is oversold, a doji appears, indicating indecision and weakness of sellers to maintain the downward trend. In addition, prices are near a pro- jected pivot point support target level. When a doji appears, you should:
• Buy on the close or on the next open after a new closing high is made from the previous doji candle high, especially when the market is against a key pivot point support target number. • Place stops below the lowest low point of the doji. Stops should be ini- tially placed as a stop-close-only, meaning you do not exit the trade un- less the market closes back below the doji’s low. • Sell or exit the trade on the close or on the next open of a candle that makes a lower closing low near a key pivot point resistance number.
You can use a “filter” or backup process to confirm the buy signal, such as a MACD indicator or channel of moving averages.