What Does Doji Candle Mean

doji candle pattern

The https://forex-trend.net/ has a long upper shadow, no real body, and little or no lower shadow. This implies that the session’s open, close, and low prices are at the same level, but at some point in the trading session, the price traded higher. 71.6% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning. Between 74%-89% of retail investor accounts lose money when trading CFDs.

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The final doji forex pattern that formed appeared right at the 61.8% Fibonacci retracement ratio and after momentum divergence! These additional methods can greatly help a trader in identifying the doji candlesticks that might lead to the highest probability reversals. Originating in Japan, candlestick charting was invented by legendary Japanese rice futures trader Homma Muneisha. Doji candles are often considered necessary by technical analysis traders. Although a Doji may not mean much in a trendless market, the appearance of a Doji candle in a trending market can be an essential event, primarily to identify trend reversals. Primarily used in daily charts, Doji candlesticks can be spotted in any chart interval and across all timeframes.

A long-legged Doji means indifference about the future price direction of the underlying security. Technical analysis represents an essential aspect of trading in financial markets. Therefore, knowing to read and implement the long legged Doji candlestick in your trading strategy should be the priority of every professional trader.

  • Depending on past price action, this reversal could be to the downside or the upside.
  • Bulls were defending this level heavily, while bears were trying to push it down.
  • With the open and the close being at the top of the candlestick and the high being at the bottom, the pattern resembles a gravestone, hence the name.
  • As a result, the candlestick can often mean there is significant indecision, and commonly takes place at the top or bottom of a trend.

The doji candlestick is just one of the numerous candlestick patterns in technical analysis. Of course, the theory is essential, but you won’t succeed without practicing. You can try and practice your knowledge on theLiteFinance free demo account without registration.

Doji Formations: Learn How to Interpret Them to Help Trading Strategies

The character depends on the https://en.forexbrokerslist.site/ type and the place where it emerges. However, a doji provides a stronger signal when it appears in an uptrend; in this case, it is a sign of a bearish reversal. Enter trades only when you are sure in the direction the price is moving in.

dragonfly doji

This happens because long-legged dojis are sometimes grouped together or as part of a larger consolidation. These consolidations could lead to a reversal of the previous trend, or a continuation, depending on how the price breaks out of the consolidation. Gravestone Doji and Dragonfly Doji may signal a price reversal, but they need confirmation. If you expect a downward movement after the Doji’s formation, open a short trade after the following candlestick is formed. The Stop-Loss level is located above the high of the Doji candlestick. If you expect a market reversal, use such indicators as MACD, RSI, Awesome Oscillator, Stochastic and Moving Averages.

From mid-morning until late-afternoon, General Electric sold off, but by the end of the day, bulls pushed GE back to the opening price of the day. The first doji outlined on Chart 1 in the previous section was a high-low doji, where prices made the highs for the day first, and the lows for the day second. 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. Some expert giving suggestion to wait until the next candle confirms the Doji signal. This could be one reason why pin bars are more popular than Doji.

Doji and spinning top candles are commonly seen as part of larger patterns, such as the star formations by technical analysts. Apart from these disadvantages, Doji can still be used as a reliable price action analysis tool. In fact, this candle pattern can also be used to complement your trading strategy, especially methods that focus on finding reversal opportunities. If the previous trend of price movements was up, after the appearance of the Doji, traders assumed that there would be a reversal to the downtrend so they would to open sell.

How to trade using the doji candlestick pattern

75% of retail client accounts lose money when trading CFDs, with this investment provider. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money. No, a Doji candle pattern does not always indicate a reversal. The Doji candlestick is formed when the price opens and closes around the same level, even after trading higher or lower or both direction during the trading session. What it means is that the price couldn’t find equilibrium at any other level aside from the open price.


Doji usually forms at least a few bars after the price moves up or down, which indicates uncertainty the market participants will be taken to where the next price movement is. During a corrective phase, as in our example, price will often find resistance at an important Fibonacci level. The Western world was only introduced to the candlestick chart during the 1990s by the renowned technical analyst, author and speaker Steve Nison. Join thousands of traders who choose a mobile-first broker for trading the markets.

Swing Trading Alerts (+Results)

The trend reversal is confirmed if the third candle is bearish and opens with a gap down that covers the previous gap up. If the price is in the middle of the trading range, and the shadows have equal length, such a candlestick is called Rickshaw. It is important to emphasize that the doji pattern does not mean reversal, it means indecision.

First, you determine the timeframe, support, and resistance levels. The Dragonfly doji has a T-like shape and looks like a dragonfly, that is why it is called so. Typically, a bullish doji appears in a downtrend and signals a reversal, but it can also occur in an uptrend. However, when it appears in an uptrend, it requires additional confirmation by other candlestick patterns.

When you see the doji candlestick pattern and you want to place a trade, you can do so via derivatives such as CFDs or spread bets . Derivatives enable you to trade rising as well as declining prices. So, depending on what you think will happen with the asset’s price when one of the doji patterns appears, you can open a long position or a short position. A doji candle chart occurs when the opening and closing prices for a security are just about identical. If this price is close to the low it is known as a “gravestone,” close to the high a “dragonfly”, and toward the middle a “long-legged” doji. The name doji comes from the Japanese word meaning “the same thing” since both the open and close are the same.

When Doji appears the Doji pattern only shows market consolidation. After a candlestick doji appears, the price may move in the direction of the previous trend or vice versa as a trend reversal. Our final trade example shows two doji forex patterns that appeared at a 78.6% Fibonacci retracement level, right before a corrective phase ended. Here too, the MACD indicator showed clear momentum divergence before the price reversed higher. Lastly, we added the MACD indicator in the lower panel of our chart.


This https://topforexnews.org/ follows the speed and momentum of the market over a specific timeframe, predicting price movements. A Doji candle pattern can be used to identify potential support and resistance levels by looking for the high and low points of the pattern. This can be used to help traders identify when the market may be preparing to move in a particular direction. The dragonfly Doji has a long lower shadow, little or no upper shadow, and no real body.

In Japanese, “doji” (どうじ/ 同事) means “the same thing,” a reference to the rarity of having the open and close price for a security be exactly the same. Depending on where the open/close line falls, a doji can be described as a gravestone, long-legged, or dragonfly, as shown below. There is no definite indication whether the possibility of reversal or forwarding can be identified from the candlestick Doji. Dragonfly Doji model is the reversion of the Gravestone Doji model, with a long lower tail character and an open and close price above the candle at the same or close to the same price. BlackBull Markets is a reliable and well-respected trading platform that provides its customers with high-quality access to a wide range of asset groups. The broker is headquartered in New Zealand which explains why it has flown under the radar for a few years but it is a great broker that is now building a global following.

As for the limitations, the Doji candlestick reflects the uncertainty of traders and the signals. It’s not the best pattern to use for defining the price direction. Some traders struggle to tell the difference between the Doji candlestick and Spinning Top. 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.

Doji Vs Spinning Top: What Is The Difference?

Recently, we discussed the general history of candlesticks and their patterns in a prior post. We also have a great tutorial on the most reliable bullish patterns. Trading without candlestick patterns is a lot like flying in the night with no visibility. Sure, it is doable, but it requires special training and expertise. With enough practice, you might just find yourself an expert at discerning bullish and bearish doji candles like Gravestones, Dragonflies, Spinning Tops, and Haramis.

If your bet isn’t confirmed, the market may keep moving in the same direction, or a correction will occur. It’s the opposite type of the Dragonfly Doji and is considered a bearish reversal pattern. It has a long upper shadow, a small body and a lack of or a small low shadow.

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