Introduction to the Doji Arrows Indicator
Candlestick patterns often indicate a market behavior which traders may take note of. For example, certain candlestick patterns may indicate a point of indecision. These are candles with very small bodies called the Doji candle. This is because price has just closed at a point near to where it opened. These points of indecision may also mean a possible reversal. The Doji Arrows Indicator was developed to help traders identify potential Doji candles where the market may reverse.
What is the Doji Arrows Indicator?
The Doji Arrows Indicator is a reversal signal indicator which is based on candlestick patterns particularly the Doji Pattern.
This indicator automatically identifies Doji Patterns and plots arrows pointing the direction of the possible direction of the market after the point of indecision. It plots a blue arrow pointing up below a candle whenever it detects a Doji candle with a possible bullish reversal. On the other hand, it also plots a red arrow pointing down above a candle whenever it detects a Doji candle with a possible bearish reversal.
How the Doji Arrows Indicator Works?
The Doji Arrows Indicator has an algorithm which automatically detects possible Doji candles based on the distance between the close price of a candle and the close price of its preceding candle. It then compares the difference between the two price points with a preset threshold to qualify the candle as a Doji Pattern. In this case, the indicator is preset to detect candles with a distance between the two points below 1 pip as a Doji candle. It then identifies the direction of the possible reversal based on the distance between the close price and the high and low price of the candle.
How to use the Doji Arrows Indicator for MT4
The Doji Arrows Indicator has a few variables which can be modified within the indicator settings.
“ThresholdB” and “ThresholdS” allows users to modify the distance between the closing price of the candles which would be used to qualify the Doji candles. This value is in actual price value, which mean the value 0.0001 and -0.0001 are set at a distance of within 1 pip.
“CountBars” refers to the number of historical price bars in which the indicator would detect for possible Doji candles.
Buy Trade Setup
When to Enter?
Open a buy order if the Doji Arrows Indicator would plot a blue arrow pointing up in confluence with the trend direction and a visually confirmed Doji candle.
When to Exit?
Close the trade as soon as price action shows signs of a possible bearish reversal.
Sell Trade Setup
When to Enter?
Open a sell order if the Doji Arrows Indicator would plot a red arrow pointing down in confluence with the trend direction and a visually confirmed Doji candle.
When to Exit?
Close the trade as soon as price action shows signs of a possible bullish reversal.
Conclusion
The Doji pattern is an effective indicator of a possible reversal. However, this indicator may sometimes identify candles which do not visually qualify as Doji candles as a possible signal. Traders should still visually confirm if the candle does resemble a Doji pattern before using the trade signal.
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