Tri Star Pattern – Rare Reversal Signal

What is Tri Star Pattern?

Tri Star is a rare reversal pattern formed by three consecutive Doji candles at the end of a strong trend. All three candles have very small bodies (open and close nearly equal), reflecting extreme market indecision. This pattern can signal a bullish or bearish reversal depending on the preceding trend and its location.

How to Identify Tri Star Pattern

To identify the Tri Star pattern, traders should note:

• Three consecutive Doji candles: small bodies, open and close close together, may have long or short shadows. [diagram:doji-standard]
• The Doji candles can be standard, Long-legged (long shadows), Dragonfly (long lower shadow), or Gravestone (long upper shadow).
• The pattern appears after a clear trend: strong uptrend (bearish Tri Star) or strong downtrend (bullish Tri Star).
• The middle candle often has longer shadows than the other two, showing wide price swings but closing near open.
• Confirmation needed: the next candle must break above/below the pattern’s high/low to confirm reversal.
  

How to Trade Tri Star Pattern

Upon detecting Tri Star at trend end, traders can:

• Confirm signal: Wait for the fourth candle to close beyond the highest (for bullish reversal) or lowest (for bearish reversal) point of the pattern.
• Entry: Place Buy (if bullish) or Sell (if bearish) after the confirmation candle closes.
• Stop Loss: Set below the pattern’s low (bullish) or above its high (bearish) to avoid being stopped out by volatility.
• Take Profit: Use at least 1:2 Risk:Reward or measure prior swing. Often target equals distance from previous swing high/low to the pattern.

Real Example

Assume a strong uptrend, then three consecutive Doji candles (small bodies, long shadows) appear. This suggests buying pressure is weakening. If the next candle closes below the pattern’s low, a Sell trade can be taken. In a downtrend, three Doji candles at the bottom signal a bullish reversal. [diagram:generic-chart]

Common Mistakes

• No confirmation: Entering immediately after three Doji without waiting for the fourth candle leads to false signals.
• Confusing with single Doji: One Doji is not a strong signal; need three and a clear trend.
• Ignoring context: Tri Star is only valid at the end of a trend, not in a sideways market.
• Tight stop loss: Due to potential volatility, keep stop loss wide enough to avoid premature exit.