A Variety of Doji Candlesticks

Student”s Question:

What do the different types of doji signify on the trading charts?-doji-Long legged doji-Dragon fly doji-Gravestone doji-4 price doji.

Instuctor’s Response:

Any doji candle signals market indecision and the

potential

for a change indirection.

Doji’s are formed when the price of a currency pair opens and closes at virtually the same level within the timeframe of the chart on which the doji occurs. Doji’s that would indicate higher probability trading situations would be when they occur when a pair is overextended either to the upside or the downside. Since they indicate the potential for a change in direction, the change in direction is more likely when price action is overextended.

Below is an example of a

standard doji

candle.

The

L


ong


L


egged


D


oji

below simply has a greater extension of the vertical lines above and below the horizontal line. During the timeframe of the candle, price action dramatically moved up and down but closed at virtually the same level that it opened. This shows the indecision between the buyers and the sellers.

The

D


ragonfly


D


oji

below can appear at either the top of an uptrend or the bottom of a downtrend and signals the potential for a change in direction. There is no line above the horizontal bar signifying that
prices
did not move above the opening price. A very extended lower wick on this doji at the bottom of a bearish move is a very bullish signal.

The

G


ravestone


D


oji

below is the exact opposite of the dragonfly. It appears when price action opens and closes at the lower end of the trading range. After the open the buyers were able to push the price up but by the close they were not able to sustain the bullish momentum. At the top of a move to the upside, this is a bearish signal.

The

4


P


rice


D


oji

below is simply a horizontal line with no vertical line above or below the horizontal. This would be the ultimate in indecision since the high, low, open and close (all four prices represented) by the candle were exactly the same. It is a very unique pattern signifying once again indecision or an extremely quiet market.