Tri Star (3 stars) is a very special pattern as they are made up of 3 doji. This model is very rare in the market, but when it appears, Tri Star shows that the market is in a state of extreme indecision and has a great potential for reversal. In this article, we will help you understand this model.
What is Tri Star Top / Bottom?
Tri Star (3 stars) is a pattern of 3 Doji candles giving a trend reversal signal. If it appears at the top of the uptrend, this pattern is called the Tri Star Top, if it appears at the bottom of the downtrend, this pattern is called the Tri Star Bottom.
For Tri Star Top, 3 Doji candles form the shape of an upward triangle. For Tri Star Bottom, .3 Doji candles form the shape of a descending triangle.
If you do not know what a Doji candle is, you can read the article Trading guide with Doji candles ours
Features of Tri Star Top / Bottom
The Tri Star Top model has the following characteristics:
- Appears at the top of the uptrend
- Consisting of 3 Doji candles, the second day is higher, ie creating a gap (gap) compared to the remaining 2 candles
- Usually have low trading volume.
In the opposite direction, characteristics of Tri Star Bottom include:
- Appeared at the bottom of downtrend
- Including 3 Doji candles, the second day candle is lower, meaning a gap (gap) compared to the remaining 2 candles
- Usually have low trading volume.
This is a fairly rare candle pattern appearing on the forex market as well as other high liquidity markets.
Psychological movements of Tri Star Top / Bottom model
The first Doji candle in the pattern shows the market's indecisiveness. The second doji continues the current trend and the third doji shows that the market sentiment has changed.
When a Doji candlestick appears, it shows that the market is hesitant, while there are three trees here, which shows that the indecision situation is currently very serious and is likely to lead to a sharp reversal. strong.
Instruction for trading with Tri Star Top / Bottom model
Here we guide the transaction with the model Tri Star Top, which means the pattern appears in an uptrend. For Tri Star Bottom, we understand it in the opposite way.
Entry point command
The Tri Star Top model is a reversal pattern from up to down, so we will consider the opportunity to sell. There are 2 ways to enter orders for Tri Star Top model:
- The first way is to enter the order as soon as the 3rd day of the pattern ends. The way to enter this order will help investors to have a short stop loss but it is more risky because the trend has not been confirmed. Should refer to other supporting factors.
- The second way is to wait or place a pending sell order below the bottom of the third Doji candle to confirm the trend is more certain.
How to set a stop loss
To ensure safe entry, we should place a stop loss above the top of the second Doji in the pattern.
How to set profit taking
The Tri Star Top model does not provide a specific level of profit taking. Therefore, to set profit taking, traders should take a stop loss multiplied by 2 or 3 times, for example if the stop loss is 10 pips, you will set a take profit of 20 - 30 pips. Besides, you can also set profit taking points at the previous support levels.
Actual example of Tri Star Top / Bottom model
Here is a fairly rare example of the Tri Star Top model, appearing on the Gold Future chart D1. You can see after a long bullish candle at the end of the chart, three Doji candles have appeared with the middle of the body sticking out higher than the other two.
At the previous bottom, there is also a cluster of 3 candles with candlestick in the middle lower than the other 2 candles. However, these candles are not Doji candles but Spinning Top, so it is difficult to call this the Tri Star Bottom.
We have just introduced you the concept, characteristics as well as trading, with examples of the Tri Star Top / Tri Star Bottom candlestick pattern. Hope you know how to use this pattern. Good luck!
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Author: Tin Nguyen
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