Candlestick Doji

Doji candlestick pattern is one of the most important candlestick patterns. Representing the equilibrium between supply and demand in the markets, it is a clear trend reversal signal. Communicating the prices open and close at or near the same level, candlestick Doji indicates indecision of investors. It is therefore very important to recognize Doji.

With the prices finishing very close to the same level, you will see then either a very small real body, or no real body. That is when you have a candlestick Doji pattern. If the Doji makes appearance after a long uptrend, it is a warning to investors that the trend is either close to peaking, or has already peaked in the open markets. But if it is visible after a long downtrend, it means that the prices have been forced down.

There different types of Doji candlesticks are discussed in detail below.

This Doji candlestick pattern has a long upper and lower shadow, which is almost equal in length. It is important for the trader to observe the candle’s close in relation to the midpoint. A close below the midpoint of the candle indicates weakness. Long-legged Doji pattern indicates that prices traded well above and below the session’s opening level, but the end result shows little change from the open.

This type of Doji pattern forms when the open, high, and close are equal, and the low creates a long lower shadow. Dragonfly Doji indicates that sellers moved the prices lower during the session, but by the end of the session the buyers pushed the prices back to the opening level and the session high. Looking like a “T” with a long lower shadow and no upper shadow, it is important to understand the Dragonfly Doji pattern.

This candlestick Doji is the opposite of the dragonfly, forming an upside down “T.” Having a long upper shadow and no lower shadow, it forms when the open, low and close are equal in Gravestone Doji. The high is what creates the long upper shadow. This Gravestone Doji candlestick pattern shows that the buyers pushed the prices higher during the session, and by the end of the session, the sellers moved the prices back up to the opening level.

According to the Japanese, whenever you see a Doji appears, be more attentive.