The morning star star is shown on the left.
Quantifying the Morning Star Doji
Traditionally, a formed when the following conditions are met:
Prior to Day 1: a down trend exists. I characterize this be having three days with lower closes
Day 1 candle : Long and Dark. I have characterized this candle with a body that is atleast 65% of the candle length
Day 2 candle : This candle is the doji candle. The candle should gap down. The High of the candle needs to be less than the low of Day 1 candle. This is a doji, so the candle body should be less than 15% of the total candle length
Day 3 candle : This should be a white candle that gaps up. Since this is a white candle, the Close is higher than the Open. The Low of this candle should be higher than the High of the previous day candle
Problem with the Morning Star Doji
The definition of this pattern is actually quiet strict. I back-tested this pattern. In the last 15 years, there were less than 10 instances of this pattern. I was genuinely surprised and re-checked my runs. Same results.
I think the requirement between the requirement that there be a gap between bar1 and bar2 and another gap between bar2 and bar3 makes it an overly restrictive candle
I think the requirement between the requirement that there be a gap between bar1 and bar2 and another gap between bar2 and bar3 makes it an overly restrictive candle
