The Tri-Star pattern is considered one of the secondary candlestick patterns because it does not appear as frequently as any of the 12 major signals. Please note however that this does not negate the effectiveness or the importance of these secondary signals when identifying reversals. You are provided with additional opportunities during the course of investment decisions when you are aware of the implications that the secondary signals can have.
The Tri-Star pattern is relatively rare however it is a very significant reversal indicator. It is comprised of three dojis and the three-day period illustrates indecision.
Criteria for Tri-Star pattern
- All three days in the three-day time period are dojis
- The middle day gaps above or below the first and third day and the length of the shadow should not be excessive in length. This is especially true when viewed at the end of a bullish trend.
Signal Enhancements
- A stronger reversal move is indicated the greater the gap is away from the previous day’s close.
- The chances that a significant reversal will occur, is increased by large volume on one of the signal days.
Pattern Psychology
After an up-trend or a downtrend has been in effect the appearance of the first doji reveals there is now indecision in the bull’s and the bear’s camp. The following days gaps in the same direction as the existing trend and forms the second doji. This reveals that there is no certainty in either direction. The third day opens opposite the previous trend’s direction and forms another doji for that day. At this point any investors that had any convictions will now most likely reverse their position. Due to the rarity of the Tri-Star pattern investors should double check the data source to confirm good data.
Throughout his investment career, Stephen Bigalow has directed his investment acumen towards developing improved methods for extracting profits from the investment markets. His research, encompassing all fundamental and technical methods, resulted in verifying that Candlestick analysis was superior to any other method. In consulting with money management and energy trading firms, he has successfully combined conventional research methods with Candlestick analysis to greatly enhance investment returns. His implementation of statistical analysis with the Japanese Candlestick methodology has produced some unique successful trading programs.
Continue your candlestick analysis education and read about the three black crows pattern.
