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A double doji break setup is a with-trend setup again.
When there is a good trend ongoing and then a pullback brings prices back into the 20 EMA zone then the following qualify a Double Doji setup:
- There must be two or more doji bars
- The size of these bars must be smaller than the surrounding bars of the pullback.
- There must be no visible or obvious chart resistance obstructing the path of the DD break target.
As I write these lines look what happened to our dear little Double Doji Break:
Price never reached its target. Why? Some reasons could be:
- The DD break was obstructed by clustering action of the block to the left (marked with a box)
- This was never a valid DD break to begin with even though the false break had shattered the bulls hopes - look at the huge size of the dojis compared to the pullback they originate from.
I will post the a chart to demonstrate once the price action plays itself out.
To continue our learning here I have marked out all the reasons why what happened was 'expected' - that is a taboo word, but the probability of that happening over prices moving down were tipped by overly eager traders themselves.
Trading is always reading the points where the most traders are likely to get hurt and bail out to help your trade.
Should a trader be on the agressive side - i.e. should be be quick and jump onto a moving train and trade valid first breaks for example OR should he consistently excercise prudence and skip the first trade and take the more validated second break?
It depends on the trader of course.
If a trader is:
nimble
agile
quick with execution
then he can catch a winner on a aggressive trade with consistency.
However it should be remembered that the fastest ones are not always the once who get the trophy. They can easily get sucked into being in position of the extremes of false breaks and there the ones with prudence have an edge.
The answer really is that a trader must do what matches his ir her personality and DO IT WITH CONSISTENCY.
He cannot be jumping on aggressively on one trade and trading another similar setup with prudence next just because he was burned on the last aggressive trade!