Hey everyone,
I just finished a full quantitative test of a Doji candlestick trading strategy. The Doji is one of the most popular price action signals and is often described as a sign of market indecision and a potential reversal. You see it everywhere on charts. Small body long wicks balance between buyers and sellers and many traders assume price will reverse right after.
Instead of trusting chart examples I decided to code it and test it properly on real historical data. I implemented a fully rule based Doji reversal strategy in Python and ran a large scale multi market multi timeframe backtest.
The logic is simple but strict: first the algorithm scans for a Doji candle based on candle body size relative to total range. This candle represents indecision but no trade is opened yet.
**Long entry**
* A Doji candle appears
* Two consecutive bullish confirmation candles must follow
* Entry happens at the open of the next candle after confirmation
**Short entry**
* A Doji candle appears
* Two consecutive bearish confirmation candles must follow
* Entry happens at the open of the next candle after confirmation
**Exit rules**
* Fixed stop loss per trade
* Rule based exit logic with no discretion
* All trades are fully systematic with no manual intervention or visual judgement
**Markets tested**
* 100 US stocks most liquid large cap names
* 100 Crypto Binance futures symbols
* 30 US futures including ES NQ CL GC RTY and others
* 50 Forex major and cross pairs
**Timeframes**
1m, 3m, 5m, 15m, 30m, 1h, 4h, 1d
**Conclusion**
After testing the Doji pattern across crypto, stocks, futures and forex, the results were bad everywhere. I could not find a stable edge on any market or timeframe. What looks convincing on charts completely fails when tested at scale.
Honestly, I do not see how this pattern can be traded profitably in a systematic way. Do not trust YouTube traders who claim Doji is a reliable reversal signal. Without real backtesting, it is just cherry picked storytelling.
Good luck. Trade safe and keep testing 👍