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Types of Doji Candles

Doji candlesticks indicate market indecision and potential direction changes, with five main types: Standard Doji, Long-Legged Doji, Dragonfly Doji, Gravestone Doji, and 4-Price Doji. Each type has unique characteristics that traders can use to inform their strategies, particularly in relation to prior price action and trends. Understanding these patterns can help traders identify potential entry and exit points in the market.

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31 views

Types of Doji Candles

Doji candlesticks indicate market indecision and potential direction changes, with five main types: Standard Doji, Long-Legged Doji, Dragonfly Doji, Gravestone Doji, and 4-Price Doji. Each type has unique characteristics that traders can use to inform their strategies, particularly in relation to prior price action and trends. Understanding these patterns can help traders identify potential entry and exit points in the market.

Uploaded by

sandychavhan09
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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TYPES OF DOJI CANDLES

TYPES OF DOJI: THE PATTERNS ALL


A Standard Doji is a single candlestick that does not signify
TRADERS SHOULD KNOW much on its own. To understand what this candlestick means,
A Doji candlestick signals market indecision and the potential traders observe the prior price action building up to the Doji.
for a change in direction. Doji candlesticks are popular and Trades based on Doji candlestick patterns need to be taken
widely used in trading as they are one of the easier candles to into context. For example, a Standard Doji within an uptrend
identify and their wicks provide excellent guidelines regarding may prove to form part of a continuation of the existing
where a trader can place their stop. uptrend. However, the chart below depicts a reversal of an
In this article we explain how Doji patterns are formed and how uptrend which shows the importance of confirmation post the
to identify five of the most powerful and commonly traded occurrence of the Doji.
types of Doji:
Types of Doji Candles: 2. Long-legged Doji
1. Standard Doji The Long-Legged Doji simply has a greater extension of the
2. Long Legged Doji vertical lines above and below the horizontal line. This indicates
3. Dragonfly Doji that, during the timeframe of the candle price action
4. Gravestone Doji dramatically moved up and down but closed at virtually the
5. 4-Price Doji same level that it opened. This shows the indecision between
the buyers and the sellers.
At the point where the Long-Legged Doji occurs (see chart
below), it is evident that the price has retraced a bit after a
fairly strong move to the downside. If the Doji represents the top
of the retracement (which we do not know at the time of its
forming) a trader could then interpret the indecision and
potential change of direction. Subsequently looking to short the
pair at the open of the next candle after the Doji. The stop loss
would be placed at the top of the upper wick on the Long-
Legged Doji.

3. Dragonfly Doji
The Dragonfly Doji can appear at either the top of an uptrend
HOW ARE DOJI CANDLESTICK PATTERNS or the bottom of a downtrend and signals the potential for a
change in direction. There is no line above the horizontal bar
FORMED? which creates a ‘T’ shape and signifies that prices did not move
Dojis are formed when the price of a currency pair opens and above the opening price. A very extended lower wick on this
closes at virtually the same level within the timeframe of the Doji at the bottom of a bearish move is a very bullish signal.
chart on which the Doji occurs. Even though prices may have
moved between the open and the close of the candle; the
fact that the open and the close takes place at almost the 4. Gravestone Doji
same price is what indicates that the market has not been able The Gravestone Doji is the opposite of the Dragonfly Doji. It
to decide which way to take the pair (to the upside or the appears when price action opens and closes at the lower end
downside). of the trading range. After the candle open, buyers were able
Keep in mind that the higher probability trades will be those that to push the price up but by the close they were not able to
are taken in the direction of the longer-term trends. When a Doji sustain the bullish momentum. At the top of a move to the
occurs at the bottom of a retracement in an uptrend, or the top upside, this is a bearish signal.
of a retracement in a downtrend, the higher probability way to
trade the Doji is in the direction of the trend. In case of an 5. 4 Price Doji:
uptrend, the stop would go below the lower wick of the Doji The 4 Price Doji is simply a horizontal line with no vertical line
and in a downtrend the stop would go above the upper wick. above or below the horizontal. This Doji pattern signifies the
ultimate in indecision since the high, low, open and close (all
TOP 5 TYPES OF DOJI CANDLESTICK four prices represented) by the candle are the same. The 4
Price Doji is a unique pattern signifying once again indecision or
PATTERNS
an extremely quiet market.
1. Standard Doji pattern

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