Doji candlestick
A single candle used to create a short-term pattern is called a Doji candlestick. In Japanese, Doji means "the same thing." It's the ideal term for a candle with a very small body, meaning that the open and close prices are at or almost at the same level.
This is because bulls and bears have equal power and none is in charge. A Doji candle, which is dominated by wicks, frequently signifies market hesitation.
Both continuation and reversal patterns can be used to this kind of candlestick. The form of a candle and where it falls within the trend determine the signal that the Doji gives.
Type of Doji candlestick
A single candle used to create a short-term pattern is called a Doji candlestick. In Japanese, Doji means "the same thing." It's the ideal term for a candle with a very small body, meaning that the open and close prices are at or almost at the same level.
This is because bulls and bears have equal power and none is in charge. A Doji candle, which is dominated by wicks, frequently signifies market hesitation.
Both continuation and reversal patterns can be used to this kind of candlestick. The form of a candle and where it falls within the trend determine the signal that the Doji gives.
- Doji Star (Classic)
- Long-legged Doji
- Dragonfly Doji
- Four-price Doji
- Gravestone Doji
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| Doji candlesticks |
Doji star
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| Doji star |
Long legged Doji
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| Long legged doji |
Similar to a doji star, a long-legged foji, also known as a "rickshaw man," has longer wicks on both sides. This kind of candle also indicates indecision because the market is significantly more volatile and there is no clear indicator of the next trend.
Both strong uptrends and downtrends can produce a long-legged doji candlestick formation, which indicates that the current trend may be nearing its end and that a reversal may be imminent.
Dragonfly Doji
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| Dragonfly doji |
The reverse of a gravestone doji is a dragonfly doji candlestick pattern.
With a body towards the top with a very lengthy lower wick and a much shorter upper wick, it is a bullish indicator. As a result, the open, high, and closing prices of a dragonfly doji candle are all quite near to one another.
Both uptrends and downtrends can produce this kind of candle, but it is seen to be stronger when it appears at the bottom of the downtrend and frequently signals an impending price reversal.
A dragonfly doji, which is present in the upswing, would suggest that it will continue.
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| Four-price doji |
The four-price doji is an extremely uncommon pattern that resembles a horizontal line with the opening, closing, high, and low prices all at or close to the same level. This doji pattern indicates that the market is quite indecisive and has very little volatility. The four-price doji, like the neutral doji, can suggest that the trend is waning.
Gravestone Doji
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| Gravestone doji |
The body of a gravestone doji candle is near the bottom, and the upper and lower wicks are significantly longer and shorter, respectively.
This bearish reversal pattern frequently occurs at the conclusion of an upward run. The gravestone doji indicates that although the bulls were able to push the market higher, they were unable to force a close close to the peak price of the candle. Because of this, the bears were able to pull the price back down, bringing the open, close, and low prices to about the same level. This could be a sign that the price direction is about to reverse.
The gravestone doji, on the other hand, would suggest that the downturn will continue if it is discovered.
How to trade the Doji candlestick
Since the doji candle by itself is typically insufficiently powerful to offer a conclusive trading signal, it is frequently combined with other technical analysis methods to bolster the conclusions.
Among the most often utilised instruments with a doji candle are the amount of support and resistance. For instance, the gravestone doji in the picture below closed close to the uptrend's resistance level. Bears forced the price to remain inside the trend channel, indicating that the higher price was rejected. The trend shifted because bears continued to push the price lower because they had a little more power over the market.
Finding two successive doji candles is another method of trading with doji candles; this typically indicates even more market indecision. A trend reversal frequently occurs when two candles appear in a trend channel one after the other.
Using a doji candle in conjunction with the RSI oscillator is another well-liked trading strategy. Doji candles, which indicate indecision, emerged in the uptrend, as seen in the graphic below. However, the RSI indicates that the instrument is overbought. The tendency reversed as a result of these two events.
These are but a handful of possible doji candle positions. Remember that the emergence of these candlestick patterns is only a signal and does not ensure trend continuance or reversal. To avoid unanticipated losses in the event that the market moves against your prediction, it is imperative that you use risk management methods.
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