All Doji Candlestick Patterns & How to Trade Them

Finding a perfect 4-price doij on a chart is difficult because bulls and bears always compete. And, it is difficult to find a situation in which bulls and bears are equally strong or weak. For example, 2 green Doji candlestick in a row shows the tug-of-war between buyers and sellers continuing for another candle period. 3 Doji candlestick in a row and even 4 Doji candlestick in a row reflect very balanced forces and a consolidation pattern. As a new trader, you’re used to seeing candlesticks with a solid body – that rectangle part representing the range between the open and close. The spinning top is the same as a common doji, except that the spinning top has a small real body, whereas the doji should have little to no real body.

1. Dojis occurring within established trends, especially at key support or resistance levels, often act as warning signs.
2. The stochastic indicator thus supports the predictions of the doji candlestick.
3. A gravestone doji differs from other doji patterns in the position of the horizontal line.
4. Technical analysts use the doji term to refer to all of the above patterns but specifically call out a doji by its proper name when they want to be more specific, e.g., a dragonfly doji.
5. The second gravestone doji appears after a harami candlestick pattern.

Indication of Market Indecision

If the price has tested the highs/lows (of the Long-Legged Doji) multiple times, then it’s likely to break out. This means the market is undecided after a huge expansion in volatility (which usually occurs after a big news event). Thus, you’ll look to go long when the types of doji price does a pullback towards a key Moving Average and forms a Dragonfly Doji. So, what you want to do is go long when the price comes to Support and forms a Dragonfly Doji. However, it’s not long before the buyers took control and fought their way back higher.

How is a Doji candlestick Pattern formed?

The formation of a doji pattern may indicate a sense of indecisiveness in the market where neither buyers or sellers are able to gain the upper hand. Examples of bearish candlestick patterns are the hanging man, dark cloud cover, shooting star, evening star, bearish harami, tweezer top etc. The image indicates that the long-legged doji appears at the end of a strong bullish trend. The long-legged doji can be spotted by its minutely thin body and long upper and lower shadows.

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Dragonfly doji patterns commonly occur at the end of a downtrend and signal an upcoming bullish trend. An example of a dragonfly doji pattern is depicted in the price chart below. The green body of a doji candlestick implies that the closing price was slightly higher than the opening price. The red body of the doji implies that the closing price was slightly lower than the opening price.

As seen in the image, the standard doji appears at the end of an uptrend. In such a case, investors and traders pay close attention to the patterns that follow it. A doji candlestick can be identified by its distinct shape which resembles a plus sign or a cross symbol.

In a long-legged doji, the horizontal line or body falls close to the middle of the two shadows. Alt three conditions in the morning star structure are also valid for the evening Doji star candlestick pattern. Near the end of an uptrend, the first candle should be long and bullish, and the second one should be at the top and signal indecision. In contrast, the third and final candle signals the start of a reversal as buyers are no longer in control over the price action.

This equilibrium can precede a significant price move, especially if the Doji appears after a prolonged trend. Doji and spinning tops both are similar in nature, and represent market indecision. In isolation, a Doji candlestick acts as a neutral indicator and provides little information. A market is not very strict and does not react if a few cents or points a candle closes higher or lower. And, you do not react either if there is a few cents or points variation. In general, long-legged doji means that both sides, bears, and bulls are fighting to defeat the other side.

The evening doji star is a three-candle bearish reversal pattern that contains a doji. This star doji has a long white candle, followed by a gap up doji, followed by a gap down bearish candle. The doji is said to be a star doji as there’s a gap on both sides, and it’s an evening because it portends darkness or bearish price action. A popular Doji candlestick trading strategy involves looking for Dojis to appear near levels of support or resistance.

In case of an uptrend, the stop would go below the lower wick of the Doji and in a downtrend the stop would go above the upper wick. The only difference between a shooting star and a gravestone doji is that the first has a real body that can be seen. When a shooting start has a very small body we treat it as a gravestone doji. The third dragonfly doji (a bullish doji) confirms the second doji and bulls’ power. Additionally, the between the second doji and the candle after that and another gap adds to the confirmation. And, the only difference between a hammer and a dragonfly doji is that the first has a small body.

The open, high, low and close are all equal and fall on the same line. 4-price dojis differ from other patterns in that it is the only doji pattern with no vertical line as part of the pattern. 4-price dojis are easy to spot using their distinct shape which is a mere horizontal line. The order could also reverse, with bears dropdown prices first before bulls push it back up to the opening price. Either way, the end result is a close right back where the candle started, signaling balanced tension between buyers and sellers.

Because a doji means indecision, you should combine doji candlestick patterns with other techniques as well to lower your risk. The second gravestone doji appears after a harami candlestick pattern. Additionally, the momentum indicator indicates that it is possibly an overbought condition. A dragonfly doji plus a harami pattern and an overbought situation tell us to think of a trend reversal. Other advantages of the doji candlestick pattern include its ability to point out trend highs and market uncertainty.

They must wait for the next two patterns that follow the doji to confirm the trend. As seen in the image, both the following candlesticks show an uptrend. The bullish reversal can now be confirmed and investors and traders can plan their strategy accordingly.

Investors and traders make interpretations about price movements when they witness the cross or plus-shaped doji candlestick. The image below depicts the three kinds of doji patterns and their colours based on opening and closing prices. The dragonfly doji candlestick pattern is also similar to the common doji pattern. The only difference is that the opening and closing price ends up near the high of the day.

You can identify a Dragonfly Doji pattern from its unique appearance, long bottom wick, and no real body. Dragonfly Doji indicates that sellers initially drove prices higher, but buyers took control by the end of the session, driving prices back up to the session high. The image depicts the shape of the standard doji that resembles the plus or cross symbol. The length of the upper and lower depends on the high and low price of the security for the day.

It’s common to see the Four-Price Doji in markets where trading volume and liquidity is extremely low. Thus, you’ll look to go short when the price does a pullback towards a key Moving Average and forms a Gravestone Doji. In a strong trend or healthy trend, the market is likely to “bounce off” the Moving Average. So, what you want to do is go short when the price comes to Resistance and forms a Gravestone Doji. Discover how you can generate an extra source of income in less than 20 minutes a day—even if you have no trading experience or a small starting capital. The articles and research support materials available on this site are educational and are not intended to be investment or tax advice.

For example, a Standard Doji within an uptrend may prove to form part of a continuation of the existing uptrend. However, the chart below depicts a reversal of an uptrend which shows the importance of confirmation post the occurrence of the Doji. The first doji appears in the middle of the trend, one candle after a short period of bullish correction. Because it passed a correction, it is less likely to be a reversal pattern.

The lengths of the wicks can vary, and they reflect the volatility of the market during the period. A Doji is a term derived from the world of Japanese candlestick charts, representing a significant tool in technical analysis of financial markets. When looked at in isolation, a Doji candlestick pattern indicates that neither the buyers nor sellers are gaining – it’s a sign of indecision. A spinning top also signals weakness in the current trend, but not necessarily a reversal. If either a doji or spinning top is spotted, look to other indicators such as Bollinger Bands® to determine the context to decide if they are indicative of trend neutrality or reversal. Dojis are formed when the price of a currency pair opens and closes at virtually the same level within the timeframe of the chart on which the Doji occurs.

A Doji pattern holds significance in technical analysis as it indicates market indecision and potential reversals. It represents a balance between buyers and sellers, suggesting that neither party has gained control during the specified period. This can be a signal for traders to anticipate a potential change in the prevailing trend. 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.

You can use any technical levels to watch for the Doji patterns – support and resistance levels, Fibonacci, etc. For this example, though, we’ll use supply and demand zones – it’s what I mostly use, so it makes it easy. But, if you take it into context with the earlier price action, you’ll have a sense of what the market is likely to do with the doji pattern.

A gravestone doji candle is a pattern that technical stock traders use as a signal that a stock price may soon undergo a bearish reversal. This pattern forms when the open, low, and closing prices of an asset are close to each other and have a long upper shadow. The shadow in a candlestick chart is the thin part showing the price action for the day as it differs from high to low prices. While traders will frequently use this doji as a signal to enter a short position or exit a long position, most traders will review other indicators before taking action on a trade.

A doji is a pattern that occurs in a session of trading where the opening and closing price of an asset are almost equal. They are often interpreted as components of larger patterns and do not occur very often under normal circumstances. The word ‘doji’ itself means ‘blunder’ or ‘mistake’ in Japanese due to the scarcity of instances where the open and close prices are almost exactly the same.

Then, simply monitor the situation and watch for price action that could cause price to move in the other direction. In this post, I’m going to give you a detailed breakdown of the Doji candlestick along with its many variations so you can see what it is, why it forms, and what it signals. Apart from the Doji candlestick highlighted earlier, there are another four variations of the Doji pattern. While the traditional Doji star represents indecisiveness, the other variations can tell a different story, and therefore will impact the strategy and decisions traders make.

A Doji occurring in an uptrend can suggest the trend may be losing steam. It may indicate that buyers are no longer as enthusiastic to continue pushing the price higher, and sellers are starting to fight back. The Doji candlestick pattern is one such type of candlestick chart belonging to the family of Japanese candlestick charts, invented in 17th century Japan by rice traders to trade.

A doji is often considered to be a sign of indecision in the market, as neither the buyers nor the sellers were able to gain control during the trading session. It is a neutral candlestick pattern that does not provide any clear indication of the future direction of the market. However, dojis can also indicate a potential reversal in the trend, depending on the context in which they occur. A spinning top candlestick is similar to a doji candlestick, but it has a larger body when compared to a doji candlestick.

The length of upper and lower shadows (wicks and tails) vary, mimicking a plus sign, cross, or inverted cross. However, in short period candlestick forex pairs, specifically, when the American market closes, you can find a lot of 4-price doji patterns. This article explains doji candlestick patterns and provides you with five examples. In conclusion, dojis are a common candlestick pattern in forex trading, indicating indecision in the market. While they are not a reliable signal on their own, they can be a useful tool when used in combination with other technical indicators. Traders should look for confirmation from other technical indicators before making any trading decisions based on dojis.

The doji candlestick and its type must be identified from the price chart before proceeding to the next step. The image shows that the doji occurs at the end of the downtrend, and it is identified by its long lower shadow. The close, open and high all fall in positions very close to each other, and there is a considerable distance between the low and the rest of the points. The image also indicates that the dragonfly doji pattern indicates an upcoming bullish reversal, as the prices start to advance after the appearance of the dragonfly doji. Doji candlestick patterns form when the open and close prices of a currency pair, stock, or cryptocurrency are virtually equal for a given timeframe.

The gravestone doji candlestick pattern, sometimes called the tombstone pattern, is the opposite of a dragonfly doji. While the pattern provides a signal of potential reversal, traders should wait for subsequent price action to confirm the trend change. This confirmation can come in the form of the next candlestick or a sequence of candlesticks, providing more reliable indications of market direction.