Introducing the Doji candlestick pattern

Introducing the Doji candlestick pattern

Author: Michael view: 42 Update: 13/11/2023 Downloads: 0

The Doji candlestick pattern has 5 variations, while the Standard Doji candlestick pattern represents hesitation, indecision. Then other variations can tell a different story and will therefore influence traders’ strategies and decisions.

Doji candlestick patterns that traders should know

Doji candlesticks signal market hesitancy or the possibility of a trend change. Doji candlesticks are popular and widely used in trading because they are one of the easiest candlesticks to identify, and Doji candlesticks provide useful instructions on how much a trader can set a stop loss.

In this article will explain how Doji candlestick patterns are formed and how to identify 5 of the strongest and most commonly traded types of Doji patterns:

Standard Doji

Long – legged Doji

Dragonfly Doji

Gravestone Doji

4-Price Doji

Top 5 Doji candlestick patterns

How are Doji candlestick patterns formed?

The Doji candlestick is formed when the opening and closing prices of a currency pair are at approximately the same level in the timeframe of the chart on which the Doji appears. Although the price may have moved between the opening and closing prices; The fact that the opening and closing take place at almost the same price is what shows that the market cannot decide whether the price is going up or down.

Keep in mind that the trades with a higher probability will be those that are executed according to the long-term trend. When a Doji candlestick appears at the bottom during an uptrend correction cadence or the top of a correction cadence in a downtrend, traders should trade the Doji candlestick in the direction of the trend. In case of an uptrend, the stop loss will be below the lower shadow of the Doji candlestick, and in a downtrend, the stop loss will be above the upper shadow.

Doji candlestick in the price chart

Top 5 Doji candlestick patterns

1. Standard Doji candlestick pattern

Standard Doji is a single candlestick that does not have much meaning of its own. To understand the meaning of this candlestick, traders observe price action before forming a Doji candlestick.

Candle Standard Doji

Trades based on Doji candlestick patterns need to be included in the specific case. For example, a standard Doji candlestick in an uptrend can confirm as part of the continuation of the current uptrend. However, the chart below depicts the reversal of an uptrend, which shows the importance of confirmation after the Doji candlestick appears.

Standard Doji candlestick pattern appears in the EUR/USD chart

2. Long candlestick pattern – legged Doji

Long-legged Doji simply has larger extensions of upper and lower candlestick shadows. This shows that, within the time frame of the action the candlestick price moved up and down significantly but closed almost at the opening price. This shows hesitation and hesitation between buyers and sellers.

Long candlestick – legged Doji

At the point where the Long-legged Doji candlestick appeared (see chart below), it is clear that the price has rebounded a bit after a rather strong move to the downside. If the Doji candlestick appears at the top of the correction rhythm, traders can explain the hesitation and potential reversal of the market. Then, look to sell the pair at the opening of the next candlestick after the Doji. The stop loss will be placed at the top of the candle shadow on Long- legged Doji.

Long-legged Doji candlestick pattern appears in the EUR/USD exchange rate chart

3. Dragonfly Doji candlestick pattern

Dragonfly Doji can appear at the beginning of an uptrend or at the bottom of a downtrend and signal a possible trend change. There is no shadow above the horizontal bar that creates a ‘T’ shape and signifies that the price is not moving above the opening price. A lower candlestick shadow expands. When this Doji candlestick is at the bottom of a bearish trend, it will show a strong bullish signal again.

Dragonfly Doji candlestick pattern

Dragonfly Doji candlestick pattern appears in the EUR/USD chart

4. Gravestone Doji candlestick pattern

Gravestone Doji candlestick pattern opposite Dragonfly Doji. It appears with a pattern where the opening and closing prices are located at the bottom point of the trading range. After opening, buyers were able to push the price up but by the end of the session they could not sustain the upward momentum. When this candle is at the top of a bullish move, it will indicate that this is a bearish signal.

Gravestone Doji candlestick pattern

Gravestone Doji candlestick pattern appears in the EUR/USD chart

5. 4 Price Doji candlestick pattern

The 4 Price Doji candlestick is simply a horizontal line with no upper and lower shadows. This Doji pattern signifies the last hesitation because the highs, lows, openings, and closes are equal (all four price levels represented by the candle are the same. 4 Price Doji is a single pattern that shows once again hesitation or an extremely calm market.

4 Price Doji candlestick pattern

4 Price Doji candlestick pattern appears in the EUR/USD chart

Understanding different Doji candlestick patterns will allow traders to apply this knowledge when trading with Doji candlesticks. Reading candlestick charts is an important foundation to have before analyzing more complex techniques such as Doji candlesticks.

Conclude

In this article, we discussed the Doji candlestick pattern – one of the most important patterns in technical analysis. In general, Doji candles can provide important information about the balance between supply and demand in the market. The appearance of Doji candles is often considered a sign of fluctuations between buying and selling, and can predict changes in price trends.

We learned about the different variations of the Doji candlestick, including the Long-Legged Doji, Dragonfly Doji, and Gravestone Doji, each of which brings its own message about the market situation. Understanding these variations can help investors and traders make smarter decisions.

However, it should also be noted that the Doji candlestick pattern is not always accurate and sometimes needs to be combined with other factors to make accurate predictions about the market trend. At the same time, risk management and the use of other tools and indicators are important to minimize risk and optimize returns.

In summary, the Doji candlestick pattern is a useful tool in the investor and trader’s toolbox, but it also requires a deep understanding of the market context and combination with analytical methods. other to achieve the best results.

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