Doji Reversal Trading Strategy (Backtest + Candlesticks Rules)

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1 year ago
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Doji Candlesticks Reversals.
In this video, we explore the doji pattern and its effectiveness in the stock market. We explain what a doji is and how to spot it on a chart. We backtest the doji pattern to determine its performance compared to random periods, using specific trading rules instead of anecdotal evidence.

We also improve the doji strategy by implementing improved exit rules. Our trading code is available for purchase on our website, where we have backtested and coded all candlestick patterns. The top ten candlesticks outperform buy and hold, even though they are invested only 35% of the time.

We cover the four types of dojis - Neutral, Gravestone, Dragonfly, and Long-Legged - and their signals. We use the S&P 500 (SPY) market for our trading rules, where we buy when we spot one of the four dojis and sell N-days later.

Our backtest shows that the doji pattern yields slightly better results than random periods. However, we add a sell criterion to exploit the mean reversion effect in the market, which yields an average gain of 0.32% per trade over a four-day holding period.

We also implement an RSI filter to buy when the market is somewhat oversold, resulting in only 62 trades but an improved average gain per trade of 0.54%. Although the equity curve is not particularly inspiring, these results demonstrate the effectiveness of the doji pattern when paired with specific trading rules.

Visit our website for more information on candlesticks and performance, and don't forget to like and subscribe to help us deliver more free videos. Good luck trading!

Chapters
0:00 Doji Candlesticks reversals
1:00 Different types of Doji
1:35 Trading Rules
1:43 Backtest result
2:07 Improvement
2:20 A Twist

#doji #DojiCandlesticks #TradingStrategy #StockMarket #TechnicalAnalysis #Backtesting #MeanReversion #RSIFilter #TradingRules #CandlestickPatterns

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✅ RISK DISCLAIMER
Quantified Strategies (SIA Lofjord) is not an investment advisor. The content and information provided are educational and should not be treated as financial advisory services or investment advice. Trading and investment in securities involve substantial risk of loss and is not recommended for anyone who is not a trained trader or investor – it shall be conducted at your own risk. It is recommended that you never risk more than you are willing to lose. Leverage can lead to substantial losses. Any use of leverage, margin, or shorting is at your discretion. Quantified Strategies (SIA Lofjord) is not responsible for any losses that occur as a result of its content and information.
Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, Since the trades have not been executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs, in general, are also subject to the fact that they are designed with the benefit of hindsight. No representations are made that any account will or is likely to achieve profit or losses similar to those shown.

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