Doji Candlestick Formations : NobleTrading Blog

Thursday, October 16, 2008

Doji Candlestick Formations

Doji are an important group of candlestick formations which carry important market information on their own and with preceding and following candlesticks. Doji candlesticks are characterized by very small body; formed as a result of very close (virtually equal) opening and closing prices. When taken singly doji are neutral candlestick patterns, but with adjoining candlesticks they indicate market reversal and bullish or bearish trends.

Doji candlestick formation can be of 4 types as common doji, long-legged doji, dragonfly doji and gravestone doji. Irrespective of the type, all doji formations are considered moderately reliable trading patterns which require confirmation.

Common Doji: The candlesticks look like a plus sign, cross or inverted cross. When they occur after a significant uptrend or downtrend, they indicate trend reversal.
Long-legged doji: This is a doji formation with long upper and lower wicks, and the body is ideally at the middle. They usually indicate high amount of indecision in market or high competition between buyers and sellers.
Dragonfly doji: They are doji formations which resemble English letter ‘T’. They are formed when sellers have dominated the trading session/day, but buyers have managed to bring the price back to opening level.
Gravestone doji: They are doji formations which resemble inverted ‘T’. They are formed when buyers have dominated the trading session/day, but sellers have managed to bring the price back to opening level.