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What is a doji candlestick? The most popular

what is a doji candlestick? This is one of the Japanese candlestick patterns, providing important reversal signals in technical analysis, helping traders easily grasp market psychology and make comments about future price trends. Therefore, if you want to build an effective trading strategy, you need to understand what the Doji candlestick pattern means and how to trade it. In today’s article, Learn Forex Trading will provide you with detailed information about Doji Candles.

Learn information about doji candles

When talking about Japanese candlestick patterns, one cannot ignore the Doji candlestick. In technical analysis, traders often use Doji candles. This candlestick pattern reflects market price developments relatively accurately. From there, investors will make the right decision when placing orders, bringing high profits. So what is a doji candlestick? What are the characteristics?

Concept of what is a doji candlestick.

The doji candle is a candlestick pattern in the Forex chart, it has the opening and closing prices equal or nearly equal. The candle body looks small, on the Doji candle it looks like a horizontal line and the wick can be longer or shorter. The Doji candlestick pattern is now frequently used by traders for technical analysis and predicting market price trends.

When Doji candles appear on the price chart, it means the market is in balance and most investors are hesitant. There is a struggle between buyers and sellers, but neither side has control over the market. This results in the opening and closing prices being almost equal.

Learn about doji candles
Learn about doji candles

Although stock prices still rise and fall throughout the trading period, at the end of the trading period, the closing price is still close to the opening price. The Doji candlestick here shows hesitation and indecision between the uptrend and downtrend. So, this is a signal that a price reversal is about to happen.

See more: Gold prices worldwide: Things should know

Characteristics of what is a doji candlestick.

Doji candles are a simple Japanese candlestick with opening and closing prices almost the same. This creates a candle with a small body or nobody at all. Structural characteristics of what is a doji candlestick?

  • Short candle body or no candle body: The candle body of a Doji candle is usually very short or has no candle body. If there is a candle body, it is usually smaller than 2/3 of the body of a regular Japanese candle.
  • Long or short candle shadow: The candle shadow of the Doji candle can be long or short. The upper candle shadow and lower candle shadow usually have the same length.
    Doji candles have many different meanings
    Doji candles have many different meanings

Meaning of what is a doji candlestick in stocks?

In addition to its ability to effectively identify characteristics and predict trend reversals, the Doji candlestick pattern also provides traders with a number of important trading implications, as follows:

Doji candlestick signals a trend reversal

When Doji shows hesitation and indecision in uptrends and downtrends, it signals a future reversal. One thing to note is that if the price trend drops too far and the market continues to follow the old trend, the price will move sideways.

Warning the trend is going down

Meaning of what is a doji candlestick? After a series of ascending candles, gradually becoming smaller, the candle appears. This shows that buyers are weakening and exhausted. This is an opportunity for sellers to take control and gradually return to the market. This will push the price down and the trend will change from bullish to bearish.

Let traders know the psychology of the market

Doji candles show us the balance between buyers and sellers. This can be understood as market psychology being uncertain or fluctuating. Buyers and sellers are both vying for control of the price, and neither side can gain a clear advantage.

Meaning of doji candles
Meaning of doji candles

The most popular doji candlestick patterns in the stock market

Inexperienced traders, often mistakenly believe that there are only red doji candles and green doji candles. However, the Doji reversal candlestick pattern is much more diverse than that. So what is a doji candlestick pattern? Let’s find out:

Dragonfly Doji candlestick

This type of diagonal candlestick has a “T” shape, especially if it only has a lower shadow but no upper shadow or has a shadow but is very small. Usually, candles appear at the beginning of an uptrend and at the end of a downtrend.

Dragonfly doji candlestick pattern
Dragonfly doji candlestick pattern

Dragonfly Doji candlestick shows that the market is in an uptrend. When buying volume suddenly increases, that is when the dragonfly candlestick forms. During this period, buyers have the upper hand, and prices are immediately pushed up.

Long-legged Doji candle

The long-legged doji candlestick pattern is a candlestick pattern that shows the hesitation and indecision of investors. If a long-legged doji appears, it indicates a sudden and strong increase in price during that trading period. But the closing price will not exceed the opening price and will be almost the same. It can be seen that at this time both the buyer and seller are hesitant.

Standard Doji candlestick pattern

This is the only mode that does not make much sense in trading. Traders need to combine this pattern with a specific market to understand what the Standard Doji means.

The emerging candle shows an uptrend and a possible continuation of the initial uptrend. In other cases, the appearance of a standard Doji candle will show confirmation of a trend change from bullish to bearish.

Tombstone Doji candle

Tombstone Doji candles have the opposite shape of dragonfly candles. This pattern has a long shadow at the top that disappears at the bottom because the opening price is equal to the lowest closing price. This candlestick during an uptrend strongly confirms that selling pressure is increasing. From that point on, the closing price will be pushed down to the lowest price.

Tombstone doji candlestick pattern
Tombstone doji candlestick pattern

Four-price Doji candlestick pattern

This type of candle is also known as a shadowless doji candle. This pattern has a special shape, with only one horizontal line and no candle shadows. The 4-price Doji candlestick pattern shows the indecision of market operators. The market at this time will be extremely calm and there will be no major fluctuations.

See more: Opening and verifying an ICMarkets account

Things to note when trading what is a doji candlestick?

The doji candlestick pattern is the trader’s right hand and helps increase the likelihood of successful trading. But the model can still be misleading. Therefore, traders need to clearly understand the following principles when trading with doji candles:

  • Doji candles should not be used alone under any circumstances. And if you want to increase the probability of success, traders need to combine it with other signals, such as: candles that have appeared, support, resistance, price patterns, RSI, MACD, and other indicators. ..
  • Set stop loss and take profit levels in trading to keep your money safe. Because prices are always fluctuating, it is difficult to predict. Especially when new news appears, price fluctuations become more serious.
  • Doji candles only provide short-term signals, so traders should take full advantage of them in developing their strategies.

The Doji candlestick pattern is not a perfect indicator and has certain limitations. The biggest disadvantage is that it can only predict short-term price trends at sea. If you only rely on Doji candles, you will be lost in long-term and unpredictable prices. In short, Doji candles are only suitable for use within 1 to 3 days or less. Longer time frames will not give accurate signals. In addition to the Doji candlestick, you can also learn more about what the inside bar candlestick is to support more convenient trading.

Epilogue

We have just shared comprehensive and in-depth information related to what is a doji candlestick model for your reference. And how to use them effectively to invest in Forex, Cryptocurrency, and stock markets. Learn Forex Trading hope this shared article will help you partly understand how the Doji model works and apply it effectively to your investment plan.

Frequently asked questions?

When does the Doji candle appear?

Doji candles mainly appear when the market is in balance. This means both buyers and sellers are stuck but neither side wins outright.

In which financial markets can the Doji candlestick pattern be applied?

Most financial markets use doji candles in their analysis. Including the foreign exchange market, stock market, cryptocurrency trading, and derivatives market.

Can Doji candles be used as a standalone indicator?

Doji candles can still be used as a standalone indicator but they are more effective when combined with other technical indicators.

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