Doji Means


In addition, the dragonfly doji might appear in the context of a larger chart pattern, such as the end of a head and shoulders pattern. It’s important to look at the whole picture rather than relying on any single candlestick. The size of the doji’s tail or wick coupled with the size of the confirmation candle can sometimes mean the entry point for a trade is a long way from the stop-loss location. A doji names a trading session in which a security has an open and close that are virtually equal, which resembles a candlestick on a chart.


Dojis are often used as components in patterns used to detect trading opportunities. Dragonfly dojis are very rare, because it is uncommon for the open, high, and close all to be exactly the same. There are usually slight discrepancies between these three prices. The example below shows a dragonfly doji that occurred during a sideways correction within a longer-term uptrend. The dragonfly doji moves below the recent lows but then is quickly swept higher by the buyers. The signal is confirmed if the candle following the dragonfly rises, closing above the close of the dragonfly.

candlestick patterns

Opposite to the Gravestone Doji, a Dragonfly Doji (which looks a “T”) signifies that a stock or other financial asset opened and closed at the day’s high. It tends to form at the peak of an upward trend and signals a possible trend reversal. A doji is not as significant if the market is not clearly trending, as non-trending markets are inherently indicative of indecision.

Some traders struggle to tell the difference between the Doji candlestick and Spinning Top. It forms when the traders are unsure about the foreseen market direction, and it looks like a plus sign. Only when you find at least ten Doji candlesticks on the price chart will there be enough confidence that you’ll be able to identify them later.

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There are different variations of the pattern, namely the common doji, gravestone doji, dragonfly doji and long-legged doji. There are many ways to trade when you see the doji candlestick pattern. First, look for signals that complement what the doji pattern is suggesting. Most traders use momentum indicators to confirm the possibility of a doji signalling reversal, because these indicators can help to determine the strength of a trend. First, you determine the timeframe, support, and resistance levels. A doji candlestick pattern works the best when trading in timeframes of one hour and longer.

Every candlestick pattern has four sets of data that help to define its shape. Based on this shape, analysts are able to make assumptions about price behavior. Each candlestick is based on an open, high, low, and close.

If you look closely, then the first doji candlestick did not break below the previous low . It is, therefore, important to note that doji candlesticks can form at any stage during a trending market and that their appearance does not necessarily lead to a trend reversal. When it comes to trading the markets, analysts will often rely on various methods to make better trading decisions. A gravestone doji pattern is the dragonfly doji flipped upside down. The opening price, low, and close are nearly the same, but the high price is much higher. A gravestone doji shows that buyers were strong early on, but by the close, they’d given up all the gains and sellers pushed the price all the way back to the open.

A Libertex demo account is a perfect way to practice without the risk of losing money. This Evening Doji Star acts as a bearish reversal of the upward price trend because price rises into the pattern and breaks out downward. A downward breakout occurs when price closes below the bottom of the three-candlestick pattern. However, as the bulls lose steam, bear regain some control into the close of the candle with selling pressure. This time the bulls start out in control and push the price of the stock higher. An ascending triangle chart pattern is a bullish technical pattern that typically signals the continuation of an uptrend.

What is the doji candlestick chart pattern?

In both cases, the candle following the dragonfly doji needs to confirm the direction. This is a strategy where you place a pending order above or below the key levels of the doji pattern. For example, you could place a buy-stop trade above the gravestone doji. If a reversal happens, this buy-stop trade will be triggered. Similarly, you could set a sell-stop below the lower side of the dragonfly doji. No, a Doji candle pattern does not always indicate a reversal.

candlestick chart pattern

Estimating the reward of a doji-informed trade also can be difficult because candlestick patterns don’t typically provide price targets. Other techniques, such as other candlestick patterns, indicators, or strategies, are required to exit the trade, when and if profitable. A doji, referring to both singular and plural forms, is created when the open and close for a stock are virtually the same. Doji tend to look like a cross or plus sign and have small or nonexistent bodies. From an auction theory perspective, doji represent indecision on the side of both buyers and sellers. Everyone is equally matched, so the price goes nowhere; buyers and sellers are in a standoff.

Looking at the overall context, the pattern and the confirmation candle signaled that the short-term correction was over and the uptrend was resuming. Traders typically enter trades during or shortly after the confirmation candle completes. If entering long on a bullish reversal, a stop loss can be placed below the low of the dragonfly.

What happens after double doji?

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. Depending on where it forms, it could indicate a change in the price direction or a continuation in the present direction.

A Doji indicator is mostly used in patterns, and it is actually a neutral pattern itself. Thus, when used alone, it doesn’t provide reliable signals. By itself, the Doji candlestick only shows that investors are in doubt. However, there are main patterns that can be easily found on the chart. The dragonfly doji is not a common occurrence, therefore, it is not a reliable tool for spotting most price reversals. There is no assurance the price will continue in the expected direction following the confirmation candle.

Long-legged doji have a long wick on both sides, indicating a lot of volatility within the session. Bulls sent the market up, bears sent it down – but by the end neither had the upper hand. Trading in Forex/ CFDs and Other Derivatives is highly speculative and carries a high level of risk. These products may not be suitable for everyone and you should ensure that you understand the risks involved. During a corrective phase, as in our example, price will often find resistance at an important Fibonacci level. The word “doji” means blunder or mistake in Japanese, which refers to the rarity of a candlestick having the exact same opening and closing price.

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A green close suggests upward rally and a red close indicates weakness. — Dragonfly Doji, if supported by strong rising volumes, can result in a reversal trend that possesses a strong underlying strength. Investors can hold onto long positions for years or even decades without running into problems. But most short positions are much shorter in duration – a few months to a few years at most.

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The moves lower after the gravestone doji, confirming that the bears have taken over again. A doji tells traders that buyers and sellers were balanced at the end of the day, but this may have big implications. If sellers have been dominating and pushing the price down, a doji suggests that the buyers held their ground. Dojis may indicate bullish and bearish​ reversals in an asset’s price. This candlestick pattern is used by traders, because it is a common and clear sign of a trend about to reverse.

During an uptrend, the first candle is increasing and has a long body. It is followed by a Doji that opens and closes above the previous candle. Dojis are indecision patterns and represent how bulls and bears fight to determine the future direction of the price. This pattern represents how an uptrend fades out and leads to a bearish reversal. Most traders allow for slight discrepancies between the prices. Some common doji candlestick chart patterns include the dragonfly doji, gravestone doji, long-legged doji, star doji, and hammer doji.

How to Read Candlestick Charts?

The best way to trade these Doji patterns is to look for them at the end of a pullback in a trend. In an up-trending market, look for the Dragonfly Doji, Morning Doji Star, Harami Cross, or Inside Bar when the price pulls back to a support level. Here, those patterns are more likely to be the beginning of a new upswing, so you are looking to go long. The Dragonfly Doji is more like the bullish pin bar , while the Gravestone Doji acts like the Shooting Star pattern.

A Japanese candlestick formation consisting of one candlestick with equal, or almost equal opening and closing prices. 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.

The dragonfly doji pattern also can be a sign of indecision in the marketplace. For this reason, traders will often combine it with other technical indicators before making trade decisions. The long-legged doji is a type of candlestick pattern that signals to traders a point of indecision about the future direction of a security’s price. This doji has long upper and lower shadows and roughly the same opening and closing prices. In addition to signaling indecision, the long-legged doji can also indicate the beginning of a consolidation period where price action may soon break out to form a new trend. These doji can be a sign that sentiment is changing and that a trend reversal is on the horizon.

When the price of a security has shown a downward trend, it might signal an upcoming price increase. Level 2 data is important for traders because it shows the full range of open orders for a stock, not just the current best bid and ask price. Using Level 2 data, you can identify potential trades before they become apparent on technical charts or get additional…