Doji Candlestick Pattern and Doji and is one of the most curious words. What is the doji candlestick pattern, a term used in the stock market, used for? People who wondered about it started to do research on this subject. What is a doji? What does the doji mean in the stock market? If you are also curious and want to learn, we have compiled it for you.
You can also read this article for all candlestick patterns in the stock and crypto market.
What is the Doji candlestick pattern?
Candlesticks formed when the opening and closing prices are very close to each other or are exactly equal, are called doji. Doji is a term that is also expressed as an indicator of indecision. If the current stock has the same opening and closing prices, a doji occurs.
Doji looks like a straight line in appearance. It is a term used to describe the equal power of buyers and sellers in the market.
What Does Doji Candlestick Pattern Mean in the Stock or Crypto Market?
Doji is the most used word in the stock market, cryptocurrency and finance sector. It can be expressed as a process that shows itself at the end of an uptrend. In the stock market, the doji can also be shown with graphs to show that the buying and selling power are equal.
How is a Doji candlestick Pattern formed?
DOJI is not actually a single candle. DOJI is a candle group containing 4 different candles. In the graphic below, I have drawn 4 different versions of DOJI for you. You can review. DOJI has no or almost no body. What does this mean? So the price closed where it opened or very close.
Let’s show how DOJI is formed with an example. In the picture below, the left is the daily doji candle, and the right is the hourly version of that daily candle. As you can see, during the 8 hour session of the day, buyers and sellers are constantly at war, the price going up and down
Biggest mistake made about DOJI.
When the share price opens at 3.22, when it sees 2.98 at the bottom, buy comes, when it sees 3.48 at the top, it sells and the stock closes the day at 3.22 again. A complete doji. An indecisive war that neither buyers nor sellers can win. Here is the biggest mistake made about DOJI.
The stockbroker who sees DOJI at the top (or bottom) says, “OK, DOJI has formed, this is a turn signal, I am opening a position in the opposite direction”. Don’t do it, my dear brother, stop, be patient. DOJI is not a reversal candle. DOJI is a field of soldiers, it is a battlefield. It is not exactly clear who will win the war. You say, “It is a reversal candle, let me trade in the opposite direction”, they hand over the goods, the trend continues. Because the winner is unknown. A doji has formed in the downtrend, what if the bears win that battle again? The trend continues down. You stay with your shares.
Example For Doji Candlestick Pattern Mistake
An example. It has left exactly 4 DOJIs in the rising trend. What happens to the investor who says “ok, the trend is over” and takes a short position as soon as they see these 4 DOJIs? What will happen? It’s potatoes. I emphasize, DOJI is not a reversal candle, DOJI is an unstable candle. It is a battlefield, it is a field of soldiers.
that is, a position cannot be taken without seeing the confirmation candle. So what is a confirmation candle? The confirmation candle is the signal candle formed after the DOJI (or any pattern). It reduces your risk, yes you may cost more, but you take less risk.
For example, an example is in the chart below. I marked it in yellow. A DOJI has been formed. Instead of entering right away, wait for the next day’s (or hour/session/week) candle, if that candle is green, hasn’t closed lower, if it’s promising then enter the position.
What does a Doji tell traders?
When taken a gander at in detachment, a Doji indicates that neither the buyers nor dealers are acquiring – it’s an indication of hesitation.
Though a few traders accept that the Doji indicates a forthcoming price reversal when seen close by other candlestick patterns, yet this may not forever be the situation.
It could demonstrate that buyers or merchants are acquiring force for the continuation of the continuous pattern.
It’s memorable’s critical that the Doji candlestick doesn’t give as much data as one would have to settle on a choice.
Prior to following up on any signs, including the Doji candlestick chart pattern, one ought to constantly think about different patterns and pointers.
most sources draw the DOJI candlestick perfectly, so I initially drew a DOJI equal to the opening and closing price. However, DOJIs can also be as follows. So theory and practice are different. The following are also DOJI, they do not have to be equal to the one-to-one opening and closing price.
Types of Doji Candlestick Pattern
There are 4 types of doji candlesticks. How are these 4 types differentiated? Careful readers will notice, of course, by the size of the upper or lower shadows. The body is not very important in DOJI because the opening price is equal to or close to the closing price, so the body is not in the middle.
It is one of the commonly seen patterns in the charts of financially traded assets in technical analysis, called candlestick charts. It is a financial term that indicates that the opening and closing prices are equal, with a small trading range in length. The doji, which can also be briefly defined as a candlestick showing that the opening and closing prices are similar or the same, is the term that shows us in the face of an unstable market.
The Long-Legged Doji candlestick is not much different from the Neutral Doji, the only difference is that the upper and lower shadows are longer. So it shows that the war is more fierce, it still needs a confirmation candle.
In my example below, the last blue marked Gravestone left the Doji. Then, with the confirmation candle, the stock market crashed on Friday. I have also marked the previous dojis on the chart, I want you to thoroughly examine how the pattern works.
The opposite of Dragonfly Doji is Gravestone Doji. Reverse what I said above, here’s your Gravestone. In other words, buyers pull the price up to a certain level, but the bears step in and the sale begins.
A DOJI with a long drop shadow and little (or no) shadow above is called Dragonfly Doji. Why is the lower shadow of a candle long? Because there are as many buyers as possible below, and as soon as the price reaches that level, buying begins, the stock turns up, leaving a shadow. Check out:
So although the Dragon Fly DOJI is still an unstable candle, the buyers are more likely to win the battle. Because even though the bears tried to pull the price down, at the end of the day, the bulls won and pushed the price back to where it started.
The candle I marked in blue in an example below is a complete dragonfly doji. As you can see, below is a serious shade. The trunk is as skinny as possible. Then the trend turned and the rise started. You can find examples like this.
I emphasize again and again, DOJIs are not turn signals, they indicate that the battle is on, that the decision has not been made. Therefore, whether it is a Neutral doji, a dragonfly or a gravestone, the position is not taken as soon as you see it. A confirmation candle is required, do not take a position until you see the winner of the battle.
What is the Difference between a Doji and a Spinning Top?
The spinning top is quite similar to the Doji, but its body is larger compared to the Doji.
The true body of a candle usually represents no more than 4-5% of the size of the entire candlestick range, forming a Doji candlestick pattern.
More than that, it becomes a spinning top. A rotating candlestick also indicates weakness in the current trend.
If a Doji or top is detected, traders should look to other indicators such as Bollinger Bands to determine the context to decide whether it indicates a continuation or reversal of the trend.
How to use Doji Candlestick Scans in StockEdge
Doji is a special candle formation. This candle indicates that the opening and closing prices are almost equal. A doji candle looks like a long plus sign. By itself, this type of candle is neutral, but it can appear on charts in different ways. The doji is often perceived in technical analysis as a sign of an upside trend that can show indecision. In indecisive situations, the doji can be a sign that the trend is about to change. However, this is not always true.
A doji can also represent a moment when buyers or sellers temporarily stop before a trend resumes. In this way, it indicates that the market may enter consolidation in preparation for its next move.