What Does Doji Mean

Posted On : October 14, 2022


It means there’s almost a 50/50 chance the market will move either up or down. Still, if you read the signals correctly, you can get more information from this pattern. It shows that the bulls were strong but couldn’t stick to highs, and the price declined. Bears have gained momentum, and as a result, there’s a high chance of a strong downtrend. The signal is even more reliable when formed on the top of the uptrend; it can be stronger than a shooting star. Use a Doji in conjunction with other technical indicators, such as support and resistance levels, to make more informed trading decisions.

continuation pattern

Nonetheless, there are several strategies that you can use to https://bigbostrade.com/ the pattern. In a chart, the long-legged doji will typically be in either of the two colors depending on the open and closing prices. The process of identifying the long-legged doji is relatively simple to use.

This is due to the high probability of reversal coming from the forming indecision in the market. It is not possible to predict future success based on past performance. The high leverage inherent in CFDs can result in a rapid loss of money. It is crucial for you to determine whether you are capable of taking the risk of losing your money when trading CFDs. A Doji is a type of candlestick pattern that is typically used to signal a potential reversal in the market. There are several different types of Doji patterns, but the most common is the standard Doji.

doji candlestick chart

But when two identical types of candlestick form consecutively, then the probability of the result will increase. The Doji candlestick pattern can be a meaningful technical indicator when examined in collaboration with other indicators and market trends. It can be beneficial in analysing future price movements of securities by highlighting the momentary indecision in the market.

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You can also see these when the market is waiting for an announcement. Although the Doji candlestick is neutral, this does not mean that there are no variations. Some of them can give clues and hints as to where the market might be looking to go next. By recognizing these different types of Doji candlesticks, you can get an idea of what has been going on in the market internally.

We’ve designed this FAQ to address the most commonly asked questions about doji candlesticks. The disadvantages of doji candlesticks come from the fact that they are neutral patterns at their core. This leads traders to take a position expecting a possible reversal, only for the doji to instead represent indecision before continuation. Doji patterns can be helpful for traders trying to identify market reversals or breakout opportunities but should not be used on their own. To confirm any potential signals from the Doji pattern, one should look at other technical indicators, such as volume, support/resistance levels, and trend lines.

After the doji candle closed, a sell order was placed a few pips below the candle with a stop loss a few pips above the same candle. The focus of this article is the long-legged doji, which looks like a cross in that it has a small body and long upper and lower shadows. The price action implies that the price opened, then rose sharply and then moved sharply below the open price and then closes at its open price.

  • There are different variations of the pattern, namely the common doji, gravestone doji, dragonfly doji and long-legged doji.
  • What is the meaning of the Marubozu in Forex and other markets?
  • Each type has its own special meaning, so this step is crucial.
  • — Dragonfly Doji, if supported by strong rising volumes, can result in a reversal trend that possesses a strong underlying strength.
  • Similar to the common type, this candlestick has longer shadows, and the body is still small as the price opened and closed at almost the same level.
  • Traders can combine the neutral Doji with momentum indicators like the RSI or Moving Average Convergence Divergence to help identify potential market tops and bottoms.

A https://forexarticles.net/ is a type of single Japanese candlestick pattern formed when the high, open, and close prices are the same. The opening and closing prices are near the top of the candlestick, with a long line coming out of the bottom to indicate the low of the interval. This pattern occurs when bears temporarily push the price down, but bulls strengthen and push the price back up before the candlestick interval closes. A reversal pattern that can be bearish or bullish, depending upon whether it appears at the end of an uptrend or a downtrend . The first day is characterized by a small body, followed by a day whose body completely engulfs the previous day’s body and closes in the opposite direction of the trend.

Why integrate long legged doji candlestick into your trading strategy?

Forex Admin Team is a dedicated group of financial professionals who are passionate about helping traders and investors grow their portfolios. We provide in-depth analysis of Forex Brokers, Stocks, CFDs, ETFs, and other financial instruments to help our readers make informed decisions. Doji simply means “change” and is typically used to signal a potential reversal in the market. If you see a Doji pattern, it’s important to pay attention to the market and see if the direction does indeed change. 89.1% of retail investor accounts lose money when trading CFDs with this provider. For example, if the Doji is followed by a long bullish candlestick, this could be a sign that prices are about to move higher.


So the https://forex-world.net/ can be used as a bearish reversal signal. It’s understood that, like any other indicator, it should be used alongside other signals. Every assumption should be confirmed by other market analysis tools. Relying on a single indicator is pretty reckless and risky.

What do 3 Dojis in a row mean?

You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. When a gravestone doji in a downtrend appears it is believed to be a weak signal or a continuation pattern as the sellers still managed to be active. You must also respect time as a circumstance, and all candlestick patterns on various time frames weaken or increase its signal strength. A Doji is a type of candlestick pattern that often indicates a coming price reversal. This pattern consists of a single candlestick with a nearly identical open and close. In a downtrend, the open is lower, then it trades higher, but closes near its open, therefore looking like an inverted lollipop.

After a long downtrend, like the one shown in Chart 1 above of General Electric stock, reducing one’s position size or exiting completely could be an intelligent move. The longer upper side of the gravestone Doji, also known as a ‘shadow’, suggests that the present market trend may be coming to an end and that the market could now be turning around. This forms when the buying and selling powers for an asset are at an equilibrium.

technical analysis

Hammer candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intraday low. If this candlestick forms during a decline, then it is called a Hammer. Comments and analysis reflect the views of different external and internal analysts at any given time and are subject to change at any time.

Like other Doji days, this one normally appears at market turning points. A continuation pattern with a long, black body followed by another black body that has gapped below the first one. The third day is white and opens within the body of the second day, then closes in the gap between the first two days, but does not close the gap. Some of the most common places to see this would be in futures contracts that are far out in time, as there may or may not be any trades on a given day.

As you see, there is a significant gap down the next day, which bulls can’t close. This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. At the opening bell, bears took a hold of GE, but by mid-morning, bulls entered into GE’s stock, pushing GE into positive territory for the day.

What is a Doji Candlestick Pattern?

The candle appears often, ranking 6th out of 103 candles, where 1 is famous and 103 is unknown. The overall performance rank is well behind the leaders, at 83. As you might have noticed, we have observed three patterns instead of one. The doji candlestick patterns differ depending on the type and the current trend.