The tristar candlestick pattern is a three-doji candlestick pattern found at the end of a trend. As the name suggests, a tristar pattern has three consecutive Doji candlesticks that appear in a triangular formation.
After the formation of this pattern, the market is expected to reverse in the opposite direction. The Doji candlesticks suggest market indecision. The appearance of three Doji candlesticks in this sequence creates trend reversal.
The tristar pattern can be either a bullish pattern or a bearish pattern.
The Doji candle can be of any type of Doji except a four-price Doji. A four-price Doji is a candle where all prices are equal.
Bullish Tristar Candlestick Pattern
What is a Bullish Tristar Pattern?
A bullish tristar pattern is found at the end of a bearish trend. This is a bullish reversal pattern. Found at the bottom of a downtrend, the bullish tristar pattern alerts the trader of a potential price reversal.
The pattern consists of three Doji candlesticks. The middle Doji candle is formed a little below the other two candles of the tristar pattern, giving it a V-shaped look.
Looking closely at the candlestick chart above, we find that the bullish tristar pattern is marked in a black circle. The middle Doji forms the lowermost price point of the pattern. Due to price reversal, the middle Doji is where the bearish and bullish trends meet.
The other two Doji candles in this pattern are formed above on two sides of the middle Doji candle. This tristar pattern or a three Doji candlestick pattern creates a unique and distinctive pattern.
The chart above shows us that the bearish pattern ends with the middle Doji, as the price reaches the lowest point in this candle. From the third candle, the bullish price reversal commences. This is what the bullish tristar pattern is.
The bullish tristar forms an important support area.
Features of Bullish Tristar Patterns
The bullish tristar has three Doji candles all of which are unique. It is formed at the lowest part of the existing trend, i.e. at the bottom of the prevailing bear trend.
The First Doji candlestick
The first Doji candlestick is a part of the existing trend. We know that a Doji candlestick has a small body and long wicks. Being a part of the continuing bearish trend, the first Doji opens lower than its previous bearish candle and closes below the opening price. Hence the first Doji is a bearish Doji.
Sometimes the Doji candlesticks have nonexistent bodies because the opening price and the closing price are the same or nearly the same. Therefore, the colour of Doji candles is not of much importance.
The Second or Middle Doji Candlestick
The second Doji is formed a little lower than the first candle. The opening price is lower than that of All other characteristics are the same. The wicks may overlap.
The Third Doji Candlestick
The third Doji candle is formed a little higher than that of the second Doji. The opening and closing prices are higher than the second Doji. The rest are the same.
The bullish price reversal starts from the third candle of the pattern.
Bearish Tristar Candlestick Pattern
What is a Bearish Tristar Pattern?
A bearish tristar pattern is found at the end of a bullish trend. This is a bearish reversal pattern. Found at the top of an uptrend, the bearish tristar pattern alerts the trader of a potential price reversal.
The pattern consists of three Doji candlesticks. The middle Doji candle is formed a little above the other two candles of the tristar pattern, giving it an inverted V-shaped look.
Looking closely at the candlestick chart above, we find that the bearish tristar pattern is marked. The middle Doji forms the uppermost price point of the pattern. Due to price reversal, the middle Doji is the area where the bullish trend and the bearish trend meet.
The other two Doji candles in this pattern are formed below on two sides of the middle Doji candle. This three Doji or tristar pattern creates a unique and distinctive pattern.
The chart above shows us that the bullish pattern ends with the middle Doji, as the price reaches the highest point in this candle. From the third candle, the bearish price reversal commences. This is what the bearish tristar pattern is.
The bearish tristar forms a significant resistance zone.
Features of Bearish Tristar Patterns
The bearish tristar has three Doji candles all of which are unique. This pattern is found at the top of a bullish trend.
The First Doji Candlestick
The first Doji candlestick is a part of the existing trend. We know that a Doji candlestick has a small body and long wicks. Being a part of the continuing bullish trend, the first Doji opens higher than its previous bullish candle and closes above the opening price. Hence the first Doji is a bullish Doji.
Sometimes the Doji candlesticks have nonexistent bodies because the opening price and the closing price are the same or nearly the same. Therefore, the color of Doji candles is not of much importance.
The Second or Middle Doji Candlestick
The second Doji is formed a little higher than the first candle. The opening price is higher than that of the previous Doji candle. All other characteristics are the same. The wicks may overlap.
The Third Doji Candlestick
The third Doji candle is formed a little lower than that of the second Doji. The opening and closing prices are lower than the second Doji. The rest are the same.
The bearish price reversal starts from the third candle of the pattern.
How Do You Identify the Tristar Candlestick Patterns?
The Doji candlestick is an easily visually identifiable candlestick pattern. Its formation is unique. The Doji candlestick indicates the indecisiveness of the traders.
Bullish Tristar Pattern
The bullish tristar appears at the bottom of a bear trend. Three Doji candles form a V-shaped pattern at the end of a bearish trend. There must be three consecutive Doji candlestick patterns. The middle or the second Doji candlestick should have a price gap between the first and the third Doji candlestick.
Bearish Tristar Pattern
The bearish tristar appears at the top of a bull trend. Three Doji candles form an inverted V-shaped pattern at the end of a bullish trend. There must be three consecutive Doji candlestick patterns. The middle or the second Doji candlestick should have a price gap between the first and the third Doji candlestick.
What Does the Tristar Candlestick Pattern Tell The Traders?
Though the Doji candlestick signifies the indecisiveness of the traders, when these candles appear with other candles to form a combination, the pattern becomes significant.
The bullish tristar signifies that the current bear trend will soon end and a price reversal is due. The pattern also gives the immediate support price which is created by the second Doji candlestick. The whole length of the middle Doji candlestick can be treated as the immediate support zone, beyond which the bears could not go. Demand increases in this zone.
The bearish tristar signifies that the current bull trend will soon to end and a price reversal is due. The pattern also gives the immediate resistance price which is created by the second Doji candlestick. The whole length of the middle Doji candlestick can be treated as the immediate resistance zone, beyond which the bulls could not go. Supply increases in this zone.
How to Trade The Tristar Candlestick Patterns?
It is imperative to say that a trader must confirm the trading condition using other indicators. Unless the trade finds confirmation from other indicators, no trader should initiate a position in candlestick pattern trading.
How to Trade Bullish Tristar Pattern?
The bullish tristar trading is rather simple for a trader. The trader initiates a buy position just above the high of the third candle. The stop loss is kept simple, just below the low of the second Doji.
We can see how the entry and stop-loss are shown in the diagram. The trade entry price is above the high of the third Doji. Stop loss below the second Doji.
How to Trade Bearish Tristar Pattern?
The bearish tristar trading is rather simple for a trader. The trader initiates a sell position just below the low of the third candle. The stop loss is kept simple, just above the high of the second Doji.
We can see how the entry and stop-loss are shown in the diagram. The trade entry price is below the low of the third Doji. Stop loss above the second Doji.
Example of Tristar Candlestick Pattern in Real Chart
The following is the chart of Gold future. In this chart, we can find both bullish tristar and bearish tristar in a single candlestick chart.
The chart shows the tristar pattern formed at the end of two trends. The first is seen at the end of a long bear trend. Pointed by a circle, we can see a bullish tristar pattern that was formed at the end of the bear trend. The tristar pattern created a support area.
At the top of the bullish trend, that was created with the bullish tristar pattern, we find another pattern which is a bearish tristar. That created a price resistance zone and another price reversal is about to take place.
Trading Strategy for Tristar Pattern
The tristar pattern can be used to create a trading strategy when used in conjunction with another indicator. The following chart shows how the RSI indicator was used for trade entry and exit. It is a bearish tristar trading strategy. We can have a similar strategy with bullish tristar patterns.
Bottomline
The tristar pattern is fairly accurate. The tristar pattern is not seen frequently. If the tristar pattern is used in conjunction with another oscillator/indicator, the trader may have a good trade.
