Doji Candlestick

The world of Forex is all about being in the right place at the right time. No matter how much capital you have to play around with, it all comes down to how well you’re able to utilize the market conditions to your advantage, and more importantly, doing so at the right time. Indeed, timing is of paramount importance in this market, considering its dynamic and ever-changing nature where every single moment with all of its small events and occurrences can mean a lot.

Considering this, it is easy to understand why we have spent so much time and energy coming up with so many different tools for making the financial market a much more coherent, understandable, and actionable place. Tools like these have made trading not only more accessible, simpler, and convenient, but more profitable as well, merely based on the fact that it increases our chances of success and our win ratio. These tools and concepts can be of various forms and types, such as charts, computer programs, trading theories, and much more; all of which help us become better at trading and making better choices as the participants of the financial market.

One such thing that can be seen as a helping tool is the Doji Candlestick pattern, which is something that can be heavily utilized for helping you make better, more well-informed decisions on the financial market by revealing a lot of details on may possibly occur next on the financial market, specifically in regards to the behavior of the traders and other market participants. This kind of information can aid you greatly in forming a correct strategy, as well as avoiding some of the common pitfalls. In this guide, we will be discussing what the Doji Candlesticks actually are, how they work, and exactly how you can utilize them for making extra profit. So, without further ado, let’s dive straight in!

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A Doji Candlestick otherwise referred to as a Doji Candle, is when a specific formation occurs on a chart. Essentially, it depicts a certain scenario that would inform us of the fact that the market is currently experiencing indecision. This means, that the market is neither bullish nor bearish. How is this useful, you may ask? Well, the very information that it reveals can be used in numerous different and subtle ways, but the benefits that it can bring are quite tangible, and when applied right, can yield considerable results.

As an example, applying a Doji Candle in cooperation with other technical tools such as oscillators can create a clearer picture, and guide you in the right direction. Let’s delve deeper into this down below.

(((keyword))) and technical analysis

When we’re discussing the matter of different market tools and their applications, it is always important to talk about how they all apply in the context of technical analysis, because the latter, for many people, happens to be one of the primary methods of analyzing the market for its price changes, and making predictions on may important matters pertaining to it, thus increasing their profits.

Of course, Doji Candles aside, there are tons of different indicators that you can gain access to using the technical analysis, and when you combine these very indicators with the Doji Candles, you gain a huge advantage and insight as to what may possibly occur on the market, specifically in regards to the price changes. As such, if you are a type of a trader that heavily relies on technical analysis, then using Doji Candles may be of second nature to you.

(((keyword))) – taking a deeper look

So, now that we have established an understanding of what particular contexts the Doji Candlesticks are useful in and what kind of benefits one can expect from understanding and using them, let’s dive a bit deeper into what they actually are, and exactly how they work.

By now, you should probably have an understanding, that essentially it’s a price pattern that forms on a candlestick chart, depicting a very specific progression on the market. To gain an understanding of Doji Candles, let’s first take a brief look at how candlestick charts work in the first place, and what exactly they are.

Candlestick charts

As you probably already know, charts are one of the most widespread and commonly-utilized tools in Forex trading. Many of them provide us with huge benefits of insight and let us gain access to information in a very unique and useful manner.

Out of all different types of charts, the candlestick charts are widely considered to be the most advanced and sophisticated types of charts, with the sole reason of being able to represent the information in a much more clear and multifaceted manner, as compared to most other chart types.

Essentially, a candlestick is a chart that is a result of a combination of line charts and bar charts, and besides the standard linear movement of the prices, it also displays three other prices – the opening price, low prices, and high prices of the day. As you will find this yourself after utilizing them for a time, this kind of information can, in the right hands, be an absolute gamechanger, solely based on the fact that it will let you plan ahead in a major way, and avoid some of the mistakes that can cost you a lot of time and money but can be avoided with the right insight.

The Doji Candle patterns(kw)

The Doji Candlestick pattern occurs specifically when the opening and closing prices of an asset are in the exact same spot. At the time of patterns like this, the vertical and horizontal lines of the Doji candlestick would be quite thin. On the other hand, a “regular” candlestick would only have one single, vertical line. The horizontal line, relatively speaking, is a bit thicker, which itself will depend on the distance between the closing and opening lines. With the Doji Candle chart, the latter is, for all intents and purposes, irrelevant.

When a Doji Candle occurs – which, as we mentioned, happens when the closing and opening prices would be closer to each other, there can be two different scenarios – either the market opens in a bullish manner with a bit of a bearish resistance trying to push down the prices, or the market would open in a bearish manner, pushing down the prices, with the resistance of upwards price movement to the opening position.

Whatever the particular case may be, the Doji Candlestick pattern would, essentially, let us know that the market has moved to both directions, and eventually reached a point of stabilization in the respective opening spot, all the while not being either bullish or bearish.

Foobar types of Doji Candlesticks

As mentioned before, there are two lines in a Doji Candle – the vertical line and the horizontal line. The vertical line is referred to as the wick, and the horizontal line is known as the body. Now, based on what would be the absolute highest price for a day, as well as what would be the lowest price for the day, the wick (the vertical line) will have a different length. The farther away the two prices are, the longer the wick’s length will be.

The body’s width, on the other hand, will always be the same, no matter what. It’s only the height of the body that will vary, based on where exactly the opening and closing prices of the bar will be. Based on this data, there can be four different types of Doji Candle pattern variations:

• The Common Doji also referred to as the Neutral Doji
• The Long-legged Doji
• The Gravestone Doji
• The Dragonfly Doji

Let’s take a detailed look at each one of these individual types, so you can get an understanding as to how they all work.

The Common Doji

The Common Doji, or the Neutral Doji, as you may guess from its very name, is the most common type of Doji Candle, mainly because of the fact that it is placed right in the middle of the given day’s low and high, or the wick. Based on this, the market may have gone up or down throughout the day, but the opening and the closing prices have all reached the point of stabilization somewhere in the middle. This of course means, that there is no specific trend of note.

The Long-legged Doji

The second type of Doji, the long-legged Doji, is to an extent similar to the Common Doji, in the sense that the body is in the center of the bar. With that being said, as compared to the Common Doji, the high and low prices of the day are more distanced from each other, which implies a larger shift in the asset prices throughout the day.

The Gravestone Doji

The Gravestone Doji forms when the opening and the closing prices of the day start equalizing at the lowest point of the day. This would indicate equilibrium, rather than the market being bearish or bullish specifically. It should also be noted, that the Gravestone Doji forms at the bottom of the downtrend, which means that there is a considerable possibility of a reversal of the price.

The Dragonfly Doji

Last but not least, the Dragonfly Doji is a bearish pattern that can form at the top of the wick. At a glance, one may be led to believe, that this pattern shows none of the two – not the bears nor the bulls – asserting dominance over the other.

However, in reality, the Dragonfly Doji shows us, that throughout the day, the bears have been driving the price down, and the bulls haven’t achieved an upward trend. This all means, that this pattern might be indicating that the trend is actually at its highest point now, and the price is likely to start heading downwards.

(((keyword))) in practice – a real-life example

Alright, so now that we have established the theory of this concept, let’s take a quick look at how the prices will actually fluctuate and go around in the case of a Doji Candlestick.

Let’s suppose that you are, at some point in time, trading on some company shares, and you notice that a Doji Candlestick is forming with the opening price of the day being at $95.25. As the day develops, the price of the asset, naturally, fluctuates through different numbers, high and low. Let’s then assume that the highest price it will go to is $98.70, and the lowest at $93.05. Now, towards the end of the day, the price closes at $95.15, which is very close to its opening price.