SINGLE CANDLESTICK REVERSAL PATTERNS: Doji

DOJI : Bullish or Bearish, Single Candlestick Reversal Pattern

It represents indecision between bulls and bears.

No real body as price opens and closes at the same position.

The length of the upper and lower shadows can vary and so the shape of the Doji can vary and may looks like cross, inverted cross or plus sign.

It signals both bullish or bearish reversal patterns depending upon preceding price action and further confirmation.

candle reversal patterns doji

Different Types of Doji –

(1) Long Legged Doji – It has long upper and lower shadows that are almost equal in length. They show how price action moves way up and down  from open, but closes virtually at the same position.They represent great amount of indecision in the market.

longleggeddoji

 

(2) Dragon Fly Doji – It  forms when the open, high and close are equal and the low creates a long lower shadow. It looks like T shape with long lower shadow and almost no upper shadow. It shows that initially sellers dominated and pushed the price down but at lower level buying emerged due to attractive price and buyers pushed it again to opening level and successful in closing at the high.

The reversal implications of a dragon fly doji depend on previous price action and future confirmation.

(3) Gravestone Doji– It forms when open, low and close are equal and the high creates a long upper shadow. So this type of Doji looks like inverted “T” shaped. They indicate that initially buyers dominated and pushed the prices higher but in later half sellers resurfaced and pushed the prices back to the low and able to close there. Hence the open low and close are virtually equal.

The reversal implications of a Gravestone doji depend on previous price action and future confirmation.

gravedoji

 

Set up

Doji as bullish reversal patternSingle candle reversal pattern Doji forms at the bottom of downtrend. Price closing above the high of Doji confirms the set up.

Doji as bearish reversal pattern – Doji forms at the top of uptrend. Price closing below the low of Doji confirms the set up.

Doji as bearish reversal pattern

Sharing a good You Tube video on Doji, which will further help to understand the pattern and underlying psychology –

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