Japanese candlestick patterns -The Doji

The Doji is one of the most important signals in Candlestick analysis. A Doji has the appearance of a cross, with the opening price the same as the close. It signifies indecision in the market (Figure 2).

Japanese candlestick patterns (Figure 2)

Other variations of the Doji are the Gravestone Doji and the Dragonfly Doji (Figure 3& 4). The Gravestone Doji shows price action that opens and closed at the bottom of its daily range, giving the bears a slight upper hand for the day and can be considered very bearish at a top. The Dragonfly Doji opens and closed at the top of its daily range and can be considered very bullish.

Japanese candlestick patterns (Figure 3)

Japanese candlestick patterns(Figure 4)

The psychology behind the Doji shows that buyers and sellers were even for the day, without one side or the other being able to get the upper hand to move the price of the stock. In an oversold market the Doji has very bullish implications and conversely, in an overbought market it has very bearish overtones. All Doji signals are enhanced by a long daily range, and overbought or oversold market conditions. Let’s look at a few charts and observe the Doji in different situations.

Japanese candlestick patterns -The Doji