The Doji Candle Pattern Demystified: A Beginner’s Guide to Trading Cryptocurrencies

Logically trade in the direction of the breakout of the next candle. On the next candle if the high or the low of Doji is breached, take the trade in that direction, keeping the other end as the stoploss. I will become Doji Candlestick Pattern more reliable and strong in other techniques such as indicators, chart patterns, and fundamental data confirming it. Due to the location of the opening and closing prices, Dojis are a signal of market consolidation.

• A doji or several doji are chart patterns if you lower the timeframe, such as flags and wedges.
• Nevertheless, a doji pattern could be interpreted as a sign that a prior trend is losing its strength, and taking some profits might be well advised.
• If the Doji pattern occurs on high trading volume, it can be a stronger signal of a potential trend reversal or market sentiment shift.
• From an auction theory perspective, doji represent indecision on the side of both buyers and sellers.
• However, one can open a position during the formation of the gravestone doji, close to the end of the trading session.
• The Doji candlestick, or Doji star, is a unique candle that reveals indecision in the forex market.

So, look for a buildup to form (as an entry trigger) and trade the breakout. This means you can long the lows (or short the highs) of the Long-Legged Doji — ideally on the first test. Thus, you’ll look to go long when the 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.

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It must be used with other chart pattern analysis techniques in order for a trader to make an informed decision. Long-legged Doji, which looks like a cross, also indicates that the price of the financial asset being traded closes in the middle of the day’s high and low. A complete doji is a candlestick whose opening and closing prices are the same. However, do not be very strict accept a candle as a doji if there is a few cents or points variation. In a short period chart such as 5-minute and 10-minute charts, a doji says nothing, because huge market players will not discount and react to small doji.

Additionally, the momentum technical indicator at the bottom of the chart went sideways when the Moving Average (MA) was going upward, warning the tiredness of the market. Furthermore, a candle before this doji has a small body and relatively long tails, which is another reversal warning. Or in other words, a doji is a candlestick in which the opening and closing prices are the same or almost the same. Below, you can see the support and resistance levels in the H4 timeframe; I also marked the local high. As the name suggests, a gravestone doji is an ominous sign that the current trend is being exhausted and is about to reverse.

What happens after a doji candle?

Therefore, when trading this pattern, it is necessary to confirm the signal using other candlestick patterns or technical indicators. A doji Japanese candlestick is a formation that appears in the candlestick chart when the price movement has stopped, and there is market uncertainty. It is important to use multiple timeframes and technical indicators to confirm Doji patterns, as well as the need for proper risk management and diversification. Any trader who wants to use the Doji candlestick pattern in their trading strategy needs to be able to find it on price charts. Fortunately, it’s relatively easy to recognize the pattern with a little practice and the use of technical indicators. While both the Dragonfly Doji and the Hammer are known for their bullish reversal patterns that appear at the bottom of downtrends, their structure is different.

The examples show that the pattern isn’t always significant on its own. If you don’t have a live trading account , you can open one quickly and easily. If you prefer, you can also look for the doji chart pattern and practise trading using a risk-free demo account. Apart from the Doji candlestick highlighted earlier, there are another four variations https://www.bigshotrading.info/ 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. However, it is important to consider this candle formation in conjunction with a technical indicator or your particular exit strategy.