You should consider using the educational resources we offer like  CAPEX Academy or a demo trading account. Some common Doji candlestick chart patterns include the dragonfly Doji, Gravestone Doji, Long-legged Doji, and variations. Each has a slightly different shape, which we discuss in more detail below. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.

• The length of the upper and lower shadows can vary, with the resulting candlestick looking like a cross, inverted cross, or plus sign.
• If other indicators confirm this prediction, then it’s a buying opportunity before the price begins to go up.
• Usually, following a price decline, a hammer candlestick appears, indicating a potential future reversal.
• Notably, the Doji is a bearish signal if the closing price is below the middle of the candle, especially if it is close to resistance levels.
• However, by the end of the session, sellers resurfaced and pushed prices back to the opening level and the session low.
• There is counterpressure from the bears who bring the price down by rejecting the higher price.

Traders can combine the neutral Doji with momentum indicators like the RSI or Moving Average Convergence Divergence (MACD) to help identify potential market tops and bottoms. doji candlestick pattern In simple terms, a Doji shows that an asset’s buyers and sellers offset each other. In doing so, any attempts to push up the price by the buyers get thwarted by the sellers.

What Does a Doji Tell Investors?

The candle may contain very little information in itself regarding future price movements. It was developed in the 18th century by a Japanese rice trader as a tool to determine future price performance. The candlestick pattern comprises the body (the hollow or filled bar) and the shadow or wick (the lines extending beyond the body). Technical analysis of the candlestick helps traders identify profitable trades. For example, a dragonfly doji looks like a T, a gravestone doji looks like an inverted dragonfly, a long-legged doji has long upper or/and lower shadows. In the next step, in particular, after determining the downward trend line, you can analyze the candlestick chart.

In the case of an uptrend, the bulls have won previous battles during the session as prices have moved higher. Now if you encountered a Doji at the top of the uptrend, it indicates the indecision in the market and there is a possibility of a trend reversal. While a doji is usually a sign of a reversal, a spinning top is usually a sign of continuation.

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In this case, you notice that the highs and the lows of the Long-legged Doji actually became resistance and support on the lower timeframe. Often what I see traders do is that when the market moves up higher and then there’s a Doji. Spinning tops appear similarly to doji, where the open and close are relatively close to one another, but with larger bodies. In a doji, a candle’s real body will make up to 5% of the size of the entire candle’s range; any more than that, it becomes a spinning top. Harness the market intelligence you need to build your trading strategies. Harness past market data to forecast price direction and anticipate market moves.

• Every assumption should be confirmed by other market analysis tools.
• For example, a Doji candlestick that forms during an uptrend could signify bullish exhaustion, i.e., more buyers moving to the sellers’ side, typically leading to a trend reversal.
• Even though the bears are starting to lose control of the decline, further strength is required to confirm any reversal.
• The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information.

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.

Types of Doji Candlestick Pattern

In this example, let’s assume the spread on the USD/CHF at the time of this trade is 4 pips. Since this stop-loss order is meant to close-out a sell entry order, then a stop buy order must be place. Doji and spinning top candles are commonly seen as part of larger patterns, such as the star formations by technical analysts.

Typically, a Doji represents indecision in the market, but it can also be a sign of slowing momentum in an existing trend. A Doji is not as significant if the market is not clearly trending, as sideways or choppy markets are indicative of indecision. Indecision reigns, as neither the buyers and sellers are in control. To be included in a Candlestick Pattern list, the stock must have traded today, with a current price between $2 and $10,000 and with a 20-day average volume greater than 10,000. Once you’ve found a strategy that consistently delivers positive results, it’s time to upgrade to a fully funded live account where you can apply your newfound edge.

Long-Legged Doji Candlestick Bottom Line

Below we explore various Doji Candlestick strategies that can be applied to trading. 4-Price Doji is a horizontal line indicating that high, low, open and close were equal. There’s a good chance that it could break out and you want to be trading the breakout of the highs. Again, you can go short on the next candle open, stop loss either above the high and then look to ride the move down lower. And you can use the level and the areas on your chart to establish a bias.

You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. This is a bearish pattern that is formed when the open, low, and closing price of an assets are all close to one another with a long upper shadow. When an asset’s price open and close are roughly at the same level, a cross shape is then created. The cross shape takes the form of a candle with an extremely small or almost nonexistent body and equal-length upper and lower wicks. Obviously, this is just one example and in no way suggests or constitutes a standalone trading strategy or methodology.